A sole proprietor mfg company has incured heavy advt expenses and due to that there has been loss in the current year statements.
Can there be deferment of expenses in the nxt yrs or we have to charge full expense in current yr only only. Or is there any other better treatment for these type of expenses
You can debit the whole Advt. exps during the year in which it has been incurred and show Business Loss, The Business Loss incurred can be set off against the Business Income in the subsequent years. Further the Business loss can be set off with the Business Income till the same becomes nil.
Regards,
Devendra Kulkarni
Deferred Revenue Expenditure
It is that expenditure for which payment is made or liability is incurred in current year, but it is expected to give benefits in future years as well. Hence, it is not a current expenditure and must not be expensed out entirely in one year.
Answer to your Query
If this heavy advertisement expenditure is expected to boost your marketing for more than one financial year, then it should be expensed out over the period of benefit. For example, if you expect to derive benefits for 3 years, then it should be expensed out on the basis of 3 years' average.
Deferred Revenue Expenditure
It is that expenditure for which payment is made or liability is incurred in current year, but it is expected to give benefits in future years as well. Hence, it is not a current expenditure and must not be expensed out entirely in one year.
Answer to your Query
If this heavy advertisement expenditure is expected to boost your marketing for more than one financial year, then it should be expensed out over the period of benefit. For example, if you expect to derive benefits for 3 years, then it should be expensed out on the basis of 3 years' average.
If u r gonna have future benefits out of advertising expenditure for more than 1 Financial Yer then u can defer it, else book it now.
Gupta Sachdeva & Co. Chartered Accountants
New Delhi
CA Final
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