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What is the treatment for 'DEFERRED REVENUE EXPENDITURE'?
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Answer Posted / sreepad
Yes, Deferred Revenue expenditure is an expenditure which gives benefits for more than one year. So, we have to proportionate the expense to several years.
Example : Sachin's Advertisement contract for Adidas for 4yrs is 20 crores, for which he will participate in all promotional events for the firm.
the deferred period will be 4 years. 5crores for each year if we proportionate equally.
But, I have one question - how can we define the benefits for each year?
Do we proportionate the benefit as per the revenue generated by the expenditure or do we have any set of rules/calculation methods/theories to define this?
The proportionate expense is taken in the P&L account for the first year and where will we show the remaining expense?
what are the Journal entries?
People please share your knowledge & thoughts.
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