Which of the following is not a deferred revenue expenditure?
Correct answer: D. Legal expenses incurred in defending a suit for breach of contract to supply goods
- A. Expenses in connection with issue of equity shares
- B. Preoperative expenses
- C. Heavy advertising expenses to introduce a new product
- D. Legal expenses incurred in defending a suit for breach of contract to supply goods
Explanation
Legal expenses for defending a claim arising from the ordinary supply of goods are revenue expenses because they relate to routine business operations. Share issue costs, preoperative costs and exceptionally heavy launch advertising were traditionally treated as deferred revenue expenditure.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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