Question

Deferred revenue expenditure charged to profit will result in inflow,

or no flow of cash​

Answer 1

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Accrual basis of Accounting talks about “Matching” concept- In simple terms, you are matching the effort (expense) you took to get the benefit (Income) in terms of money to know how much advantage (profit) this action of yours has given you during a particular period. That is why we prepare Profit & Loss account as a periodic statement.

There are some expenses which involve a heavy amount but does not result in increasing the production capacity of the entity to call it capital expenditure. So if it is not capital in nature, it has to be revenue.

But when you call it revenue the benefit (Income) you derive out of this Effort (expense) you have already put in (liability already incurred) is not confined to just one accounting period like the other expenses - salary paid, Raw material purchased etc.. Hence, you cannot write it off against one accounting period.