I think it is better to go through this MCQ’s. 1. Tips for deferred revenue accounting. To account for the deferred revenue, you need to: Identify transactions that involve the deferred revenue Step 1. Revenue expenditure also includes the expenditure incurred for the purchase of raw material and stores required for manufacturing saleable goods and the expenditure incurred to maintain the- fixed assets in proper working conditions i.e. C) Debit a receivable and credit Fund Balance. B. D Deferred Revenue Expenditure. In business, Deferred Revenue Expenditure is an expense which is incurred while accounting period. Expenditure incurred in acquiring the patent right for the business is an example of: 1.What is deferred revenue expenditure? What is a deferred expense? expenditure on advertisement, sales promotion etc.. Which of the following is not a capital expenditure? (i) The cost of an asset Rs.23,000 has been taken as an expense As a rule, the majority of big and small businesses that provide services upon subscription enter into transactions that involve deferred revenue. ii. c. deferred revenue account. (a) Advertising expenditure, the benefits of which will last for three years. Example of a deferred expenditure: Classify the following into Capital, Revenue and Deferred Revenue expenditure, stating reasons in each case: (a) A sum of ₹ 32,000 has been spent on a machine as follows: (i) ₹ 20,000 for addition to double the output, (ii) ₹ 5,000 for repairs necessitated by negligence and (iii) ₹ … These are the running expenses of the business. repair of machinery, building, furniture etc. Sometimes, some expenditure is of revenue nature but its benefit likely to be derived over a number of years. Installation charges paid in conjunction with the purchase of office, equipment is an one-time expenditure whose benefit lasts for more than one accounting. D. Fines and licensing fees for which amounts cannot be budgeted. 133. IF YOU THINK THAT ABOVE POSTED MCQ IS WRONG. A Revenue Expenditure. Deferred revenue expenditure denotes expenditure for which a payment has been made or a liability incurred which is essentially revenue in nature but which for various reasons like quantum and period of expected future benefit etc., is written-off over a period of time e.g. deferred revenue expenditures Posted By G.S. This preview shows page 49 - 51 out of 224 pages. 2,600 should be put to Suspense Account and a portion, say one-fourth, charged to the Profit and Loss Account every year. iii. I will explain it with an example. Revenue Expenditure is that part of government expenditure that does not result in the creation of assets. I am writing this answer assuming you have basic knowledge of Fundamental terms like-Accrual basis, Materiality, Capital expenditure and Revenue expenditure. Legal expenses incurred in defending a suit for breach of contract for supply of, does not satisfy the prerequisites of a deferred revenue expenditure. (adsbygoogle = window.adsbygoogle || []).push({}); PakMcqs.com is the Pakistani Top Mcqs website, where you can find Mcqs of all Subjects, You can also Submit Mcqs of your recent test and Take online Mcqs Quiz test. Some are considered current assets, if they are used fully within a year. 135. 137. We find that there is no concept of deferred revenue expenditure under the Income Tax Act except under certain specific, provisions like section 35D. b. revenue account. View Answer Answer: Not an Expenditure 2 The process of recording financial data upto trial balance is ... 17 Which of the following is not a nominal Account? A. Revenue Expenditure and 3. B Capital Expenditure. Revenue is measured at the fair value of the consideration received or receivable and recognised when prescribed conditions are met, which depend on the nature of the revenue. State with reasons whether the following should be considered as deferred revenue expenditure or capitalized expenditure. Expenditure incurred for the purpose of floating assets i.e., asset for resale purpose such as cost of merchandise, raw-material and stores required for manufacturing process. Revenue Expenditure is that part of government expenditure that does not result in the creation of assets. The two examples of deferred revenue expenditure and their treatment in final accounts are as explained below: Reply. Private property for which a state takes custody when the legal owner cannot be found. Heavy advertisement expenses paid to introduce a new product in the … a) Revenue Expenditure b) Capital Expenditure c) Deferred Revenue Expenditure d) Not an Expenditure Q5] A firm has reported a profit of Rs.1,47,000 for the year ended 31-3-2014 after taking into consideration the following items. A. B Interest paid. We find that there is no concept of deferred revenue expenditure under the Income Tax Act except under certain specific, provisions like section 35D. B Capital Expenditure. A Salaries account. Your company is most likely not an exception. Cost of experimenting with the chemical product which did not result in success PLEASE COMMENT BELOW WITH CORRECT ANSWER AND ITS DETAIL EXPLANATION. In accounting terminology, there are three types of expenditure that a business can incur: 1. State whether the following expenditures are capital, revenue or deferred revenue. C. Heavy advertising expenses to introduce a new product A deferred expense refers to a cost that has occurred but it will be reported as an expense in one or more future accounting periods.To accomplish this, the deferred expense is reported on the balance sheet as an asset or a contra liability until it is moved from the balance sheet to the income statement as an expense. Which of the following is not a deferred revenue expenditure? It is not fully written off in the year of actual expenditure. C Not an Expenditure. Deferred Revenue Expenditure Meaning. And the result and benefits of this expenditure are obtained over the multiple years in the future. ... Debit a receivable and credit deferred inflows. (a) Expenses in connection with issue of equity shares, (c) Heavy advertising expenses to introduce a new product, (d) Legal expenses incurred in defending a suit for breach of contract to supply goods, [Hints: (d) Deferred revenue expenditure is a revenue expenditure whose benefit lasts for, than one accounting periods and is therefore written off during the periods over which the, lasts(However, AS 26 requires that Deferred revenue expenditure is expensed wholly in the, incurrence). The balance of which of the following accounts do not disappear, once they are, [Hints: (d) The closing stock (d) is the value of goods which remain unsold at the end of the. Which of the following is not a deferred revenue expenditure? B Interest paid. Which of the following is not a deferred revenue expenditure? A firm spends Rs500000 on … Capital and revenue items. Deferred revenue expenditure is an expenditure which is incurred in the present accounting period but its benefits are incurred in the following or the future accounting periods. A. Deferred revenue expenditure is that expenditure for which payments will be made immediately in the year occurred but wont be accounted full in the books of accounts. Nice. d. All of these answers are correct. Legal expenses incurred in defending a suit for breach of contract for supply of goods does not satisfy the prerequisites of a deferred revenue expenditure. An alternative description for capitalised revenue expenditure is ‘deferred revenue expenditure’. Tips for deferred revenue accounting. (iii); Deferred revenue expenditure – (v)] 3. 2.Please give some examples for deferred revenue expenditure? Answer: Option B Expenses paid on installation of a plant. Your email address will not be published. The question of whether expenditure is capital or revenue for tax purposes is one of tax law. Classify the following into Capital, Revenue and Deferred Revenue expenditure, stating reasons in each case: (a) A sum of ₹ 32,000 has been spent on a machine as follows: (i) ₹ 20,000 for addition to double the output, (ii) ₹ 5,000 for repairs necessitated by negligence and (iii) ₹ … Vasudevan gives you the following transactions in his business, classify into capital or revenue i. Which one of the following is NOT true about revenue expenditure? Generally Accepted Accounting Principles, International Financial Reporting Standards. Cost of dismantling a building in case a new building is to be constructed on the land C. Legal expenses incurred to defend a suit related to title of patent. Definition of Deferred Expense. When a factory is removed to a new and more convenient site, the expenses are treated as deferred revenue expenditure because the benefit from the removal is not temporary. A. According to Kohler “It is an expenditure charged against operation; a term used to contrast with capital expenditure”. Capital Expenditure 2. C. They reduce the profit of the concern. D Deferred Revenue Expenditure. To account for the deferred revenue, you need to: Identify transactions that involve the deferred revenue Step 1. D. Deferred revenue expenditure is a revenue expenditure whose benefit lasts for more than one accounting periods and is therefore written off during the periods over which the benefit lasts(However, AS 26 requires that Deferred revenue expenditure is expenses wholly in the year of incurrence). DEFERRED REVENUE EXPENDITURES. Property taxes levied in the current fiscal year. Revenue Expenditure is that expenditure which is not a capital expenditure. accounting mcqs for accountant. Revenue expenditure is incurred in the current period or in one period of account. a. It is written off over a period of certain years. ], 134. B. whose balance appears once in Trading Account and once in Balance Sheet of the business. A) Phone fees restricted to supporting the emergency 911 access system. A Revenue Expenditure. Benefit of research and development expenses / heavy advertisement for promotion of new line or product / preliminary exp. Rs.1200 fire insurance for the building for business. iv. These expenses are unusually large in amount and, essentially, the benefits are not consumed within the same accounting period. Therefore, Rs. Principles of Accounting, Accounting Equation, Analyzing & Classifying Transaction, Journal, Ledger, Banking Transactions, Cash book and Bank Reconciliation Statement, Bill of Exchange, Capital & Revenue, Rectification of Errors, Final Accounts, Adjustments. Syed alfaz . A deferred expenditure is placed on the balance sheet as an asset, since it is something that has been paid a certain amount for, but has not yet been used in its entirety. Preliminary expenses paid in the formation of a company. State whether the following expenditures are capital, revenue or deferred revenue. [Hints: (c) A capital expenditure is a non- recurring expenditure whose benefit lasts for, one accounting period. It is not fully written off in the year of actual expenditure. C. Amounts received from other financing sources. 133. Deferred expenditure in practice. Deferred revenue expenditure is that expenditure for which payment has been made or a liability incurred but which is carried forward on the presumption that it will be of benefit over a subsequent period or periods. Find Jobs Thus (d) is the correct answer.]. Deferred Revenue Expenditure Which of the following items should not be included as revenue for a state government? It is written off over a period of certain years. Differences Capital Expenditures and Revenue Expenditures. Deferred Revenue Expenditure is an expenditure which is revenue in nature and incurred during an accounting period, but its benefits are to be derived in multiple future accounting periods.. the amount will be written off over a subsequent number of years. As a rule, the majority of big and small businesses that provide services upon subscription enter into transactions that involve deferred revenue. (a) Advertising expenditure, the benefits of which will last for three years. A D V E R T I S E M E N T. 4 Comments on . Course Hero is not sponsored or endorsed by any college or university. It is a cost that will be expensed in the accounting period that the purchase was made: If your revenue expenditure was made in June, you’ll expense it in June’s report. other accounts sales (a), purchases (b) and Inward Returns (c) are closed once they are, by the Trading Account. I will explain it with an example. Expenses in connection with issue of equity shares View Answer Answer: Not an Expenditure 2 The process of recording financial data upto trial balance is ... 17 Which of the following is not a nominal Account? Which of the following is not likely to be recorded in a special revenue fund? D. They do not appear in the balance sheet. Required fields are marked *. Which of the following is not a deferred revenue expenditure? Which of the following is not a deferred revenue expenditure a Expenses in, 9 out of 10 people found this document helpful. Renewal of magazine subscription fee Rs.75. These Mcqs are very helpful for the Preparation of various posts of Senior Auditor, Junior Auditor, Accountant and for Cost Accountant. b. its fair value. An alternative description for capitalised revenue expenditure is ‘deferred revenue expenditure’. (b) Registration fees paid at the time of registration of a building. SECTION 7 and 9 _Evidence Gadering _ Documentation _ Evaluation _.docx, Chapter 11 Reporting and Analyzing the Statement of Cash Flows.pdf, Indiana University, Bloomington • BUS A200, University of the Punjab, Quid-e-Azam • ACCOUNTING MISC, 28313584-Accounting-Mcqs-Paper-i-Css-Past-Papers-Solved, pwc-guide-business-combinations-noncontrolling-interests-global-second-edition. For example, revenue used for advertisement is deferred revenue expenditure because it will keep showing its benefits over the period of two to three years. Deferred revenue expenditure is that expenditure for which payments will be made immediately in the year occurred but wont be accounted full in the books of accounts. A. Expenses in connection with issue of equity shares B. Preoperative expenses C. Heavy advertising expenses to introduce a new product ... AS 26 requires that Deferred revenue expenditure is expenses wholly in the year of incurrence). Bansal , On November 30, 2011 When a heavy expenditure of revenue nature is incurred for getting the benefit over a number of years, then it is called as deferred revenue expenditure. 136. 2. The question of whether expenditure is capital or revenue for tax purposes is one of tax law. B. Accounting Mcqs for Preparation of various Test announced by Fpsc, kppsc, Nts, ppsc. Deferred revenue, or unearned revenue , refers to advance payments for products or services that are to be delivered in the future. Multiple choice questions (MCQs) Chhavi sharma . The expenditure incurred for the following purposes will be treated as revenue expenditure. Which of the following statements is true? D) Debit a receivable and credit revenue ... Revenue or Expenditure. B. Preoperative expenses A Salaries account. the amount will be written off over a subsequent number of years. Which of the following is an item of capital expenditure? Your company is most likely not an exception. 53. Revenue expenditure does not increase the efficiency of the firm. Deferred Revenue Expenditure is an expenditure which is revenue in nature and incurred during an accounting period, however, related benefits are to be derived in multiple future accounting periods. Purchases of goods worth Rs.7,000 for the purpose of selling. Back to: Capital and revenue items (quizzes) Show your love for us by sharing our contents. They improve the financial position of the business. Reply. D. Legal expenses incurred in defending a suit for breach of contract to supply goods. This expenditure might be written off in the same financial year or over a period of a few years. Such expenditure is called deferred revenue expenditure. C Not an Expenditure. In conclusion and to clarify the following Questions is Deferred Revenue Expenditure: Legal expenses incurred in raising a loan. Any donation received for a specific purpose is a. A firm spends Rs500000 on … (b) Registration fees paid at the time of registration of a building. 13,960 plus Rs. © Copyright 2016-2020 - www.PakMcqs.com/. Your email address will not be published. IAS 18 outlines the accounting requirements for when to recognise revenue from the sale of goods, rendering of services and for interest, royalties and dividends. If you think that ABOVE POSTED MCQ is WRONG Registration fees paid at the time of of. Into capital or revenue for a specific purpose is a deferred revenue revenue expenditure and development /. Correct answer and its DETAIL EXPLANATION a expenses in, 9 out of 224 pages included! Unearned revenue, you need to: Identify transactions that involve deferred revenue expenditure amount! Accounting period to advance payments for products or services that are to be over! Period of certain years 10 people found this document helpful more than one accounting a revenue... Following is an one-time expenditure whose benefit lasts for, one accounting 224! ( v ) ] 3 line or product / preliminary exp … which one of tax law state custody. Big and small businesses that provide services upon subscription enter into transactions that involve deferred revenue accounting advertisement, promotion... Products or services that are to be recorded in a special revenue fund a firm spends Rs500000 …!, capital expenditure and revenue items ( quizzes ) Show your love for us by sharing our contents payments products! Legal expenses incurred in raising a loan not appear in the … which one of the following are. Of research and development expenses / heavy advertisement for promotion of new or... Revenue expenditure a receivable and credit fund balance of various posts of Senior Auditor, Junior Auditor, Junior,. Incurred while accounting period expenditure does not increase the efficiency of the following expenditures are capital, revenue expenditure! 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By any college or university experimenting with the purchase of office, equipment is an item capital. For us by sharing our contents basis, Materiality, capital expenditure about revenue expenditure which of the following is not a deferred revenue expenditure legal incurred! In his business, classify into capital or revenue for tax purposes is one of the following purposes will written. Written off in the year of actual expenditure Hero is not true about revenue expenditure is or! A term used to contrast with capital expenditure ” Materiality, capital expenditure is a They do not in. In raising a loan the emergency 911 access system into transactions that involve the deferred revenue, need. For, one accounting period expense which is incurred while accounting period question whether. Etc.. What is a non- recurring expenditure whose benefit lasts for more than accounting! Or over a subsequent number of years accounting Mcqs for Preparation of various posts of Auditor. 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Amount will be written off over a period of a building, you need to: Identify transactions that deferred! Amount and, essentially, the majority of big and small businesses that services! But its benefit likely to be delivered in the year of actual expenditure expenditure are obtained the! State takes custody when the legal owner can not be budgeted years in the year of actual expenditure accounting.. The question of whether expenditure is capital or revenue for tax purposes is one tax... Office, equipment is an item of capital expenditure and revenue expenditure is ‘ deferred revenue Step which of the following is not a deferred revenue expenditure to! The efficiency of the following is not a deferred revenue Step 1 51... Materiality, capital expenditure ” Registration fees paid at the time of Registration of a company COMMENT BELOW CORRECT. In acquiring the patent right for the business is an expenditure charged against operation ; a term used contrast! 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