Preliminary Expenses are the Example of ____
By BYJU'S Exam Prep
Updated on: November 9th, 2023
Preliminary expenses are an example of Deferred revenue expenditure. Preliminary costs are those costs that are incurred before the business is incorporated and operations begin. These are seen as deferred revenue expenditures. Examples include the cost of incorporating a business and designing a logo.
Example of Preliminary Expenses
Spending to generate revenue in a subsequent accounting period is known as Deferred revenue expenditure. To receive subsequent advantages, you must pay the initial expense in full. Deferred revenue expenditure must be recognized since a portion might be deducted annually for benefits received. Logo and Survey report is a good example here.
- The accounting treatment for deferred income and expenses is based on widely-accepted accounting principles (GAAP).
- It specifically aids companies in adhering to the “matching principle” accounting guideline, which specifies that revenue and costs must be reported during the same accounting period.
- Only when the associated revenues are recorded concurrently can costs be included on the income statement.
Summary:
Preliminary Expenses are the Example of ____
An example of deferred revenue expenditure is Preliminary Expenses. The expenses involved with forming a firm are also considered preliminary expenses. Every year, a portion of these expenses is charged to the profit and loss account. The survey report is an example of the preliminary expense.
Related Questions:
