is essentially an accounting concept and alien to the Act. All fictitious assets are intangible but all intangible assets are not fictitious … Fictitious assets-fictitious assets are deferred revenue expenditure whose benefit is derived over long period of time .Even accumulated losses are also fictitious assets as they are written off over a period of time. For example, both are shown on a business’s balance sheet as current liabilities. which the benefit is likely to arise there from since in such cases the Fictitious assets are not assets but they are the heavy losses which are shown as assets in the balance sheet. For example, let’s say that you have purchased an almirah for your business. For one, they appear on completely different parts of a company's financial statements. It is shown as an asset in the balance sheet, e.g., heavy expenditure incurred on advertisements. Basic Accounting Equation : Assets= … In May, ABC has now consumed the prepaid asset, so it credits the prepaid rent asset account and debits the rent expense account. Deferred Revenue Expenditure. Fictitious Assets: Intangible assets, whose benefit is derived over a longer period of time e.g. 1. Such expenditure is then known as "Deferred Revenue Expenditure" and is written off over a period of a few years and not ... and balance is carried forward to subsequent years as deferred revenue expenditure. CLASSIFICATION OF COSTS: Manufacturing These are shown under the assets just to account for expense. Hence, we can say, all fictitious assets are intangible assets but all intangible assets are not fictitious assets. The two examples of deferred revenue expenditure and their treatment in final accounts are as explained below: same as a capital expenditure with corresponding allowability of depreciation The deferred expenses that will not become expenses within one year of the date of the balance sheet will be reported in the long-term asset section of the balance sheet under the classification of other assets… The best way to understand fictitious assets is to memorize the meaning of the word “fictitious” which means “not true” or “fake”. expenditure is essentially revenue in nature but is amortized in the books only discount on issue of debentures) akin to prepaid expenses the same would be Its benefits accrue to the business for a future period, say for 3 to 5 years. Stock: It is tangible assets of the business, which is used for the purpose of production of goods which are meant to be sale.It is of two types: (i) Opening Stock (ii) Closing Stock 2. Accrued expense. (With uses & Example). So, there is no clear provision under the I.T. Differed revenue considered as fictitious These assets are not really assets at all. Examples of Deferred Revenue Expenditure. expenditure, profit and loss (dr). If you are new to accounting, you may have a look at this Basic Accounting Training (learn Accounting in less than 1 hour) What are Assets? the same cannot be clearly and definitively assigned over time since the same All fictitious assets are intangible but all intangible assets are not fictitious … Fictitious assets are the deffered revenue expenditure as well as intangible assets i.e advertisement expenses, discount on issue of shares and debentures. For example, revenue used for advertisement is deferred revenue expenditure … Preliminary expenses etc. As an example of a deferred expense, ABC International pays $10,000 in April for its May rent. although the benefit arising there from may extend over several accounting periods, They are also known as Deferred Revenue Expenditure. Where However, the company presents it in the balance sheet as an asset … Fictious assets are those assets which are neither tangible assets nor intangible assets. ACCFIN by Seshu - Accounts & Financial Terminology for Job Seekers & Professionals, http://220.227.161.86/eac/eacfinal/vol7/5.htm. Hence, we can say, all fictitious assets are intangible assets but all intangible assets are not fictitious assets. The examples of Fictitious Assets are as follows: Fictitious assets are the deffered revenue expenditure as well as intangible assets i.e advertisement expenses, discount on issue of shares and debentures. Advertisement expenditure 2. Deferred revenue is often mixed with accrued expenses since both share some characteristics. Therefore from both of the above definitions we can understand that : Deferred revenue expenditure provides benefit to the firm for a period of moere then one accounting year or longer where as Fictitious assets are the assets from which no benefit is going to be received and the are written off as expense. In Fictitious Asset is a fake asset that does not have physical existent, and it does not meet the requirement of the intangible asset, so technical it is not the asset at all. Following are the examples of fictitious assets are-preliminary expenses, in accordance with law; In Fictitious Assets are shown in the asset side side of the balance sheet of the company and to be written off to the profit and loss account by decreasing the value of in the Balance Sheet. Such expenditure is called deferred revenue expenditure. Certain expenses though of revenue nature but likely to give benefit for more than one accounting year are treated as Deferred Revenue Expenditure like Advertisement expenses. But point to be remembered that Goodwill, Patents, Trade Marks are not the part of Fictitious assets. In each example the accrued and deferred income and expenditure journals show the debit and credit account together with a brief narrative. expenditure is essentially an accounting concept and alien to the Act. It defers this cost at the point of payment (in April) in the prepaid rent asset account. Expenditure, The basic principle which determines whether be no case for amortizing the same under the Act over the expected period over clearly and unambiguously identified over specified future time periods (e.g. (b) That is in the nature of revenue expenditure … Hello Friends, Check out our New Video On Capital vs Revenue vs Deferred Revenue Expenditure. Following are the examples of fictitious assets … Fictitious Assets. Contra Entry in Accounting: Definition, Example etc. When deciphering whether to capitalise subsequent expenditure or whether to write it off to the profit and loss, you need to look at whether the expenditure improves the asset in any way over and above its previously assessed state (as in the machine example in Figure 1). All fictitious assets are intangible but all intangible assets are not fictitious (ex goodwill, patents, trademarks, copyrights are intangible but not fictitious. Deferred expenses, also known as deferred charges, fall in the long-term asset category. Fictitious assets-fictitious assets are deferred Conversion into Cash: It can be converted into cash at any time as these are usually investments in assets. losses are also fictitious assets as they are written off over a period of Deferred revenue is often mixed with accrued expenses since both share some characteristics. The concept of deferred revenue expenditure Assets and revenue are very different things. or where the same is not allocable over defined future time periods there can The concept of deferred revenue expenditure revenue expenditure whose benefit is derived over long period of time .Even accumulated If taxes that are levied to finance a subsequent fiscal period are collected in the current period, the amount collected should be recorded as deferred revenue. Click to share on Twitter (Opens in new window), Click to share on Facebook (Opens in new window). The word fictitious literally means fake, imaginary or not true. Deferred revenue But point to be remembered that Goodwill, Patents, Trade Marks are not the part of Fictitious assets. Underwriter commission 3. (63) Total assets of a firm is 1,20,000 outside liability amounted to 60,000, total capital contributed by the partners would be ... Fictitious asset. fictitious (ex goodwill, patents, trademarks, copyrights are intangible but not Fictitious assets are expenses & losses which for some reason are not written off during the accounting period of their incidence. The part of these expenses or losses to be shown in the profit and loss account and the remaining amount will be carried forward to the following years. Fictitious assets are the expenses or losses which are not fully written off (not offset in the Profit and Loss A/c) during particular accounting period. allowable over the period to which these relate proportionately, applying the Deferred Revenue Expenditure Meaning. ... (77) Deferred revenue expenditure is expenditure : (a) That should be recognized as an asset. Goodwill, rights, deferred revenue expenditure, preliminary expenses etc. Assets vs. Prepaid expenses may include items such as rent, interest, supplies and insurance premiums. These expenses are written off over a period of 3-4 years and till they are written off, they are depicted in the balance sheet as non-current assets. The Promotional (Marketing) expenses of the company, The Discount allowed on the issue of shares. Deferred revenue vs. The loss incurred on the issue of debentures. Fictitious assets-fictitious assets are deferred revenue expenditure whose benefit is derived over long period of time .Even accumulated losses are also fictitious assets as they are written off over a period of time. It will be easier to understand the meaning of deferred revenue expenditure if you know the word deferred, which means “Holding something back for a later time”, or “postpone”.. time. expenditures are costs that benefit the company over more than one accounting period, and accordingly, the expenditures should be amortized over the life of the asset. allowable expense in the year in which it is actually incurred. The amount that has not been expensed as of the balance sheet date will be reported as a current asset. In business, Deferred Revenue Expenditure is an expense which is incurred while accounting period. 6) Fictitious Assets: Fictitious assets are those assets which are neither tangible assets nor intangible assets but represent loss or expenses yet to be written off. When a business pays out cash for a payment in which consumption does not … 17.7K views Examples of deferred revenue expenditure are advertisement costs incurred, training expenses for employees of the company. A deferred expense refers to a cost that has occurred but it will be reported as an expense in one or more future accounting periods.To accomplish this, the deferred expense is reported on the balance sheet as an asset or a contra liability until it is moved from the balance sheet to the income statement as an expense. cases where the nature of the revenue expenditure is such that the same can be They have no realisable value. is not in the Income Tax Act. act about its allowance from business income. Accrued expense. Assets and revenue are very different things. However, law is settled that accounting What is deferred revenue expenditure? In some cases, the expenditure on advertisement, sales promotion etc. We first c... Accounting systems & Golden rules of Accounting. Deferred revenue expenditure refers to that expense which is incurred in the current year but the benefit of it will be spread over 2 to 5 years and hence full amount of expenditure is not shown in the current year rather it is spread over the years. Meanwhile, accrued expenses are the money a … For example, both are shown on a business’s balance sheet as current liabilities. The recipient of such prepayment records unearned revenue … Capital Expenditure: Deferred Revenue Expenditure: 1. These expenses or losses are spread over more than one years. These expenses are treated as fictitious … Syndicate Loan: Definition, Features, Participants etc. The difference between the two terms is that deferred revenue … The concept of deferred revenue Deferred revenue vs. They are known as deferred revenue expenditures as they refers to those expenses which can be realised within particular financial year. Fictitious assets are those assets which don't have any tangible existence but some expenditure has been incurred on it. on account of some other considerations. is intangible in nature. expenditure denotes expenditure for which a payment has been made or a liability like quantum and period of expected future benefit etc, is written-off over a incurred, which is essentially revenue in nature but which for various reasons Prepaid Expenses: The firm makes a substantial investment in certain activities like sales promotion activities – the benefit for which will be incurred over the number of accounting periods, but the expenditure is born in the same year. Deferred expense and prepaid expense both refer to a payment that was made, but due to the matching principle, the amount will not become an expense until one or more future accounting periods. Examples of Deferred Expenses. Assets are something that keeps paying you for year/s. 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