(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. That is why AO himself allowed the amount debited in the profit and loss account. Manoj Fadnis Member Central Council ICAI AS AS AS AS AS AS Implementation Issues 6 … 16. Expenditure on real estate (Continued) 3 development Livestock Except Fixed assets used to develop or maintain these activities but separable from those activities. Even if the exp brings enduring benefit, if the benefit is on revenue field, i.e. View Notes - AS-16-10 from FINANCE mba at Amity University. While in contrast, revenue expenditures are the routine recurring expenditures take place in the normal business. Section - A Q2. lock #2 Loan account and section 37. lock #3 Loan account: when repayment is made in between the accounting year. expenditure on advertisement, sales promotion etc.. of revenue or expense as recognized in the statement of profit and loss and the corresponding amountwhich is recognized forthecomputationoftaxable income. Expenditures for developments,improvement and alterations are revenue expenditures but treated as capital expenditure. These expenditures are treated as assets and shown at the assets side of balance sheet. 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 . Other areas that could be affected include deferred and advanced payments, licensing arrangements, breakage and non-refundable upfront fees. Death of partner. Commission on issue of shares and debentures. However, this expenditure does not result in the acquisition of any fixed asset. Visit Our Book Store To Buy our Publications . that expenditure incurred on factory license fees, trade mark fee, seed marketing expenses, public/capital issue expenses, preliminary expenses and rental paid for pre-commencement of retail stores, factories has been treated as deferred revenue expenditure which are being amortised over the life of the concerned items. Hence we will classify it as 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. MCQ's test-2. The sale of scrap ` 1,000 is a capital receipt as it represents sale proceeds of Fixed Asset. lock. Deferred Revenue Expenditure: - In some cases, the benefit of a revenue expenditure may be available for period of two or three or even more years. 56. Deferred Revenue Expenditure is a fictitious asset: Although it appears on the assets side of the Balance Sheet, it is not really an asset to the business. Treatment of subsequent expenditure on fixed asset as deferred revenue expenditure – whether appropriate 10 4. 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. Heavy advertisement expenses. Posts about ind as icai written by caglobalindia. In a number of judgements viz. About; Nest Education; Tag Archives: ind as icai Problems & Solutions on Ind AS- Preview version. Search. The solved questions answers in this CA - CPT ICAI Model Test Paper - 2 quiz give you a good mix of easy questions and tough questions. 16 September 2008 DFERRED REVENUE EXPENSES: Any amount spent for expenses which has a characteristic of giving an enduring benefit over a period. lock. The assessee has amortized this deferred revenue expenditure amounting to Rs. 7 3. It is a recurring expenditure that occurs fairly frequently. lock #11 Suggested answers. These expenses are unusually large in amount and, essentially, the benefits are not consumed within the same accounting period. Sometimes the benefit is delayed over months or even years. Accounting for revenue - the new normal: Ind AS 115 07 Scope of Ind AS 115 Ind AS 115 applies to contracts with customers to provide goods or services. Skip to primary content. Further as per para 56 of AS 26. Before Ld. Here we discuss deferred expenses examples of House Rent Expense, Consultancy Fees, and Insurance Fees. 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. Heavy Research and development expenses. Such expenditure is then known as "Deferred Revenue Expenditure" and is written off over a period of a few years and not wholly in the year in which it is incurred. Audit of assets and liabilities. CIT(A) assessee has claimed the deferred revenue expenditure as per the Guidance Note issued by ICAI on expenditure incurred during construction period. Ans: Production wages is a revenue expenditure. Deferred Revenue Expenditure. lock #1 Introduction. #9 General doubt illustration 9 of icai book (Watch after treatment of JLP) lock #10 Self assessment test. “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). 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. the club is a dis allowable expenditure? voluntary retirement expenditure as a transitional measure in the revised AS 15, ‘Employee Benefits’. Q: Is production wages revenue or capital expenditure? 27) What is the meaning of purchase return in accounting? 2005-06 Haldia Petrochemicals Ltd. V. JCIT, Rng-12 Kol. lock. Assignment. During the relevant previous year, the assessee incurred an expenditure of Rs.41,08,556/- on software development. Nest Education We make you employable. "The Concept of Capital, Revenue & Deferred Revenue Expenditure" is one of the most fundamental accounting concept and is very essential to have … Main menu. 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. Posted on 23 Feb 2019 by caglobalindia. Also, we discuss the differences between pre-paid expenses vs. deferred expenses. These expenditures are not immediately written off in the year of actual expenditure but split over a period of certain years as per the decisions and policies of the management. 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. For example:-Preliminary expenses at the time of formation of new limited companies. capital expenditure • revenue nature : Bot Summary: The said deferred expenses would be amortized over five years from financial year 2006-07. lock. Major repair expenses. CA CPT students definitely take this CA - CPT ICAI Model Test Paper - 2 exercise for a better result in the exam. Reply . Principle: Treatment of expenditure on training as deferred revenue expenditure – whether appropriate. 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. MCQ's test-1. … 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”. 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 … 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. In other words, for accounting purposes, the concept of ‘deferred revenue expenditure’ has ceased to exist unless otherwise specified in standard, e.g. TA to only report payment of Entrance fees and not to report on its allowability. ASB, ICAI SCOPE 4 •Thedeterminationoftheamountof •expense or •saving •relatedtotaxes onincome inrespect ofanaccounting period and •thedisclosure ofsuch an amountinthe financial statements. For example, heavy advertisement expenditure is incurred on introduction of a new product in the market. Recognition Fixed asset should be recognised as an asset when: Asset is brought to its working condition for its intended use i.e. For example, goodwill, rights, deferred revenue expenditure, miscellaneous expenses, preliminary expenses, etc., are examples of fictitious assets. 2. Online exam in Rectification of Errors in Fundamentals of Accounting for preparation of professional exams of ca cpt, ca foundation, cs foundation, cma foundation,and also for B.com, M.com, MBA 805.65 million for a period over five years after the ITA No.581 & 587/Kol/2009 A.Y. 17. 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. 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). ASB Workshop on Accounting Standards CA. Empire Jute co. Vs CIT124 ITR 1 SC loss/expense and it may also be treated as deferred revenue loss. Such expense is amortised over the period of benefit being derived from it. 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 … 3.1 Assessee further clarified that the expenses primarily consists of salary and travelling expenses. 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 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. Skip to secondary content. to carryon the business more efficiently and effectively, it is revenue expenses. Capital and Revenue Expenditures and Receipts. •AS … lock . 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. Incurred an expenditure of Rs.41,08,556/- on software development as it represents sale proceeds of fixed should. •Saving •relatedtotaxes onincome inrespect ofanaccounting period and •thedisclosure ofsuch an amountinthe financial.! Archives: ind as ICAI Problems & Solutions on ind AS- Preview version 10 Self assessment Test 9 ICAI! A period over five years after the ITA No.581 & 587/Kol/2009 A.Y arrangements, breakage and non-refundable upfront.! 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