As per GN on Terms Used in Financial Statements
Fictitious Asset is defined as Items grouped under assets in a Balance Sheet which has no real value(Eg. Dr Bal of P/L Statement)
Can you say, Dr Bal of P/L St=Capital Expenditure , Definately NO
As per my knowledge,
Advertisement Exp is Revenue Exp
When Huge Advert Expeditures are incurred; For eg, to launch a new product in market the benefit flows to enterprise not only in the year when expenditure is incurred but also in next few years, So to match expediture to its benefits(Matching concept), expenditure is deferred (written off) over the years the benefit is expected to flow.
So Deferred Advertisement Exp is Deferred REVENUE expenditure which is fictitious asset
It is Not Capital Expenditure, or if so why it is not capitalised into any Fixed Asset?
The eg you have given is Advert. Suspense A/c. I cannot make any guess why any advert will be Suspense?? No enterprise will make huge advert exps without knowing what & by which media adverts are made?
Rupali
It is possible in possible bcs some times organisation are making advertisement but they are unable to categorised to that expenditure to particulars project. It happen where the oragnisation have decentralised basis of accounting are followed. In such a casse the advertisement are being mainly incurred at H.O level but the expenditiure are finally allocated to the ground level of Divisions or branches. Sometimes they are unable to find out that how much cost to be allocatd to a particular devision.
It may also possible that inspite of deffering the expenditure they categoried it as Suspense and writte off in next upcomming year. But it is traditional apporoach.
Saroj but if expenses are not allocable it has to be expensed as HO expense. A suspense account cannot be written off without clearing the suspense part of it.
Whatever nomenclature used for the account, Inability in allocating deferred Advert Expenditure to branches/divisions does not change its nature, it is still a fictitious asset and not capital expenditure
Even if you go as per income Tax Act, where expenditure is either considered as Revenue or Capital ( there is nothing like deferred revenue in Income Tax Act)
Huge Advert & Marketing Exp are allowed in the year in which it is incurred & not deferred over years. So it is definately not Capital Expenditure
May refer following Case Law : Para 3 to 6
https://indiankanoon.org/doc/92963033/
I know Rupali u r right but the accountant are not aware of Accounting Standard, lake of knowledge they categoried the same.
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