Question

ABC Ltd. spent Rs. 6,00,000for advertisement in the year 2020-2021, the benefit of which is expected to accrue at the rate Rs. 1,20,000 each year. Identify and define the type of expenditure incurred in the above case.
CLASS 11 ACCOUNTANCY

Answer 1

Answer:

Explanation:

Before journalising, wish to explain what are these types of expenses.

Those expenses, the benefit of which, is incurred for more than a year, these types of expenses are called 'Deferred revenue expenditures". if we show entire amount of expenditure in a year, the benefit will come in the following years, this will not be appropriate.  As such the amount of expenses should be written off in the years also.

Say the benefit of Advertisement expenses will go upto 5 years then entry will be as under:-

Advertisement a/c Dr                  1,20,000.00

Deferred revenue expenses Dr 4,80,000.00

     To cash/Bank (as the case may be)        6,00,000.00