Skip to content

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

Which of the following items is most appropriately treated as deferred revenue expenditure?

The heavy one-time advertising campaign expected to benefit the firm for four years is deferred revenue expenditure. It is revenue in nature, but its benefit lasts several years, so it is spread over them. Electricity and repairs are ordinary revenue expenses, and furniture is capital expenditure.

  1. ARs 20,000 paid as monthly electricity charges of the factory
  2. BRs 4,00,000 spent on a one-time heavy advertising campaign for a new product, expected to benefit the firm for four yearsCorrect
  3. CRs 50,000 paid to buy office furniture
  4. DRs 15,000 paid as repairs to a delivery van

Explanation

A one-time heavy campaign is revenue in nature but its benefit spans several years, so it is deferred and written off over that period. Electricity and ordinary repairs are plain revenue expenses of the year, and furniture is capital expenditure.

Did you get it right without looking?

One question tells you little. A timed set on Capital and Revenue Transactions shows your real accuracy, how long you take and where you lose marks.

Practise Capital and Revenue TransactionsFree diagnostic mock

More Capital and Revenue Transactions questions