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Advt exp

AMIT SINGHI (business) (52 Points)

03 July 2013

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

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5 Replies

Devendra (Chartered Accountant) (4775 Points)
Replied 03 July 2013

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

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Pranjal Mittal (Student) (90 Points)
Replied 03 July 2013

you can show advt. exp in b/s as asset only when there is future economic benefits expected frm such exp.

Omkar Shirsat (CA Final Student) (72 Points)
Replied 04 July 2013

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.