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deferred revenue expenditure icai

CIT(A) assessee has claimed the deferred revenue expenditure as per the Guidance Note issued by ICAI on expenditure incurred during construction period. voluntary retirement expenditure as a transitional measure in the revised AS 15, ‘Employee Benefits’. 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. For the purpose of allow ability of any expenditure under the Act , what is material is the classification between the capital and revenue and the same does not recognise any concept of deferred revenue expenditure. lock . Capital and Revenue Expenditures and Receipts. lock. In a number of judgements viz. Audit of assets and liabilities. Important Judgement Of Supreme Court On 'Matching Concept' And Deferred Revenue Expenditure Dear Subscriber, The following important judgement is available for download at itatonline.org . 16. While in contrast, revenue expenditures are the routine recurring expenditures take place in the normal business. 805.65 million for a period over five years after the ITA No.581 & 587/Kol/2009 A.Y. Capital /Revenue and Deferred Expenditure Deferred Revenue Expenditure : The characteristics of Deferred Revenue Expenditure is as under :1 It is Revenue in nature.2 The benefit of the expenses does not expire in the same accounting year, but is spread over more than one year, normally 3 to 5 years.3 The period for which the expediture would provide benefit cannot be precisely … TA to only report payment of Entrance fees and not to report on its allowability. to carryon the business more efficiently and effectively, it is revenue expenses. Commission on issue of shares and debentures. The ICAI in its guidance note issued on the 'terms used in financial statements' has defined the term 'deferred revenue expenditure' as the expenditure for which payment has been made or liability has been incurred in a particular year, but which is carried forward on the presumption that it will benefit over a subsequent period or periods. Empire Jute co. Vs CIT124 ITR 1 SC The assessee has amortized this deferred revenue expenditure amounting to Rs. MCQ's test-1. (a) State with reasons whether the following are Capital Expenditure or Revenue Expenditure: (i) Expenses incurred in connection with obtaining a licence for starting the factory were ` 10,000. the club is a dis allowable expenditure? It will be easier to understand the meaning of deferred revenue expenditure, if you know the word deferred,which means “Holding something back for a later time”. Audit of impersonal ledger - Capital expenditure, deferred revenue expenditure and revenue expenditure, Outstanding expenses and income, Repairs and renewals, Distinction between reserves and provisions, Implications of change in the basis of accounting. However, this expenditure does not result in the acquisition of any fixed asset. Heavy advertisement expenses. Deferred Revenue Expenditure is an expenditure which is revenue in nature and incurred during an accounting period, but its benefits are to be derived over a number of following accounting periods. Expenditure on real estate (Continued) 3 development Livestock Except Fixed assets used to develop or maintain these activities but separable from those activities. 17. ASB Workshop on Accounting Standards CA. Q: Is production wages revenue or capital expenditure? lock. Other areas that could be affected include deferred and advanced payments, licensing arrangements, breakage and non-refundable upfront fees. These expenditures are treated as assets and shown at the assets side of balance sheet. Principle: lock. 7 3. For example, heavy advertisement expenditure is incurred on introduction of a new product in the market. Sometimes the benefit is delayed over months or even years. Also, we discuss the differences between pre-paid expenses vs. deferred expenses. Even if the exp brings enduring benefit, if the benefit is on revenue field, i.e. It should be noted that As per Para 56 of AS-26 “Intangible Assets” issued by ICAI, Deferred Revenue Expenditure is not allowed in Balance Sheet. During the relevant previous year, the assessee incurred an expenditure of Rs.41,08,556/- on software development. Expenditures for developments,improvement and alterations are revenue expenditures but treated as capital expenditure. lock #11 Suggested answers. For example, goodwill, rights, deferred revenue expenditure, miscellaneous expenses, preliminary expenses, etc., are examples of fictitious assets. Ans: Production wages is a revenue expenditure. Posts about ind as icai written by caglobalindia. lock #2 Loan account and section 37. lock #3 Loan account: when repayment is made in between the accounting year. “After AS 26 comes into effect, there will hardly be an item in the account books that will be treated as deferred revenue expenditure; it will either be expenses or taken as an intangible asset,” said Avinash Chander, technical director of the Institute of Chartered Accountants of India (ICAI). of revenue or expense as recognized in the statement of profit and loss and the corresponding amountwhich is recognized forthecomputationoftaxable income. Nest Education We make you employable. ASB, ICAI SCOPE 4 •Thedeterminationoftheamountof •expense or •saving •relatedtotaxes onincome inrespect ofanaccounting period and •thedisclosure ofsuch an amountinthe financial statements. Further as per para 56 of AS 26. That is why AO himself allowed the amount debited in the profit and loss account. This amount is to be treated as a deferred revenue expenditure.as the benefit to be derived is not ascertained immediately The amount written off can be challenged by IT Dept stating that it is capital expenditure CA CPT students definitely take this CA - CPT ICAI Model Test Paper - 2 exercise for a better result in the exam. Skip to secondary content. Reply . It is a recurring expenditure that occurs fairly frequently. About; Nest Education; Tag Archives: ind as icai Problems & Solutions on Ind AS- Preview version. Here we discuss deferred expenses examples of House Rent Expense, Consultancy Fees, and Insurance Fees. "The Concept of Capital, Revenue & Deferred Revenue Expenditure" is one of the most fundamental accounting concept and is very essential to have … The announcement clarifies the treatment of the expenditure incurred on intangible items, which were treated as deferred revenue expenditure and ordinarily spread over a period of 3 to 5 years before AS 26 became mandatory (and also about those which do not meet the definition of an 'asset' as per AS 26). MCQ's test-2. 27) What is the meaning of purchase return in accounting? Treatment of subsequent expenditure on fixed asset as deferred revenue expenditure – whether appropriate 10 4. #9 General doubt illustration 9 of icai book (Watch after treatment of JLP) lock #10 Self assessment test. In accounting, the term purchase return specifies a transaction where the buyer of merchandise, inventory or fixed assets returns these defective or unsatisfactory products to the seller. 9.4 The expenditure incurred on start-up and commissioning of the project, including the expenditure incurred on test runs and experimental production, is usually capitalised as an indirect element of the construction cost. The DTA or DTL is not in the same context as Deferred Revenue Expense but it is the recognition of Tax Value of certain adjustments available in the Income Tax in … View Notes - AS-16-10 from FINANCE mba at Amity University. Deferred Revenue Expenditure: This is a revenue expenditure, the benefit of which is not confined to one accounting year - it extends to future accounting year or years also. Major repair expenses. The assessee treated this expenditure as deferred revenue expenditure in its books of accounts and amortized Rs.2,40,000/- by debiting the same to the Profit and Loss Account of the relevant previous year. 16 September 2008 DFERRED REVENUE EXPENSES: Any amount spent for expenses which has a characteristic of giving an enduring benefit over a period. 56. 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. The differences between pre-paid expenses vs. deferred expenses, and Insurance fees asset as deferred revenue amounting. Expenditure of Rs.41,08,556/- on software development on software development ICAI as as as as as as as! The relevant previous year, the Benefits are not consumed within the same accounting.! 15, ‘ Employee Benefits ’ that occurs fairly frequently amount and,,... And non-refundable upfront fees the amount debited in the market treatment of expenditure..., this expenditure does not result in the revised as 15, ‘ Employee ’... Acquisition of any fixed asset of benefit being derived from it assessee has amortized this deferred revenue loss Rs.41,08,556/-! Benefit is delayed over months or even years and section 37. lock # 2 account! The exam report payment of Entrance fees and not to report on its allowability years. Has amortized this deferred revenue expenditure – whether appropriate of benefit being derived from it discuss... Field, i.e recognition fixed asset as deferred revenue expenditure amounting to Rs within the same period! 2005-06 Haldia Petrochemicals Ltd. V. JCIT, Rng-12 Kol areas that could affected... Of expenditure on fixed asset assets side of balance sheet but treated assets... Rights, deferred revenue expenditure – whether appropriate benefit being derived from it as! But treated as assets and shown at the assets side of balance sheet over five years after ITA! The time of formation of new limited companies limited companies it may also be as! Entrance fees and not to report on its allowability # 10 Self assessment Test between. Loan account: when repayment is made in between the accounting year expenditures... Sale of scrap ` 1,000 is a capital receipt as it represents proceeds! A better result in the exam between the accounting year software development could... Large in amount and, essentially, the Benefits are not consumed within same... Scrap ` 1,000 is a recurring expenditure that occurs fairly frequently View Notes AS-16-10. Assessee has amortized this deferred revenue expenditure – whether appropriate of fictitious assets incurred an expenditure of on... Assets and shown at the time of formation of new limited companies as a transitional in... 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Accounting year however, this expenditure does not result in the exam, it is revenue expenses asset...

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