Explain deferred expenditures. How are these expenses dealt with in profitability statement?
Deferred Revenue Expenditure is revenue expenditure, incurred to receive benefits over a number of years say 3 or 5 years. These expenses are neither incurred to acquire capital assets nor the benefits of such expenditure is received in the same accounting period during which they were paid. Thus they don’t affect profitability statement as they are not transferred to the profitability statement in the period during which they are paid for. They are charged to profit and loss account over a number of years depending upon the benefit accrued.