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CMA Foundation · Fundamentals of Financial and Cost Accounting · Capital and Revenue Transactions

Which of the following is most likely to be treated as deferred revenue expenditure?

Heavy initial advertising for launching a new product is the example, because it is revenue in nature but benefits several years and is therefore spread over them. Monthly wages and electricity are ordinary revenue expenses, and furniture is capital expenditure.

  1. AHeavy initial advertisement expenditure for launching a new product with benefit over several yearsCorrect
  2. BWages paid to workers for the month
  3. CPurchase of office furniture
  4. DElectricity charges for the current month

Explanation

Launch advertising is revenue in nature but benefits several years, so it is deferred. Wages and electricity are ordinary revenue expenses benefiting the current year, and furniture is capital expenditure.

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