Deferred Expenditure

 

 

 





1 When a business entity incurs an expense on an asset, it uses depreciation to allocate the cost to each year of business. Expenses that are similarly apportioned are called deferred expenditure.

2 Expenses on research and development of a new model, or advertisement and promotion of a product are examples of deferred expenditure.

3 Accounting standards require that the expense incurred is carried on the balance sheet as an asset, until it is written down over the years.

4 Normal business practice is to write off the expenses over a few years, rather than over a longer period of time.However, since expenses impact cost and profits, write-down are subject to rules and procedures.

5 If a large expense is incurred and charged to the profits in a single year, it is called an extraordinary expense, or non-recurring expense.

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