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In: 1. Financial Accounting > Miscellaneous

What is the difference between fictitious assets and deferred revenue expenditure?

What is the difference between fictitious assets and deferred revenue expenditure?
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    1. AbhishekBatabyal Helpful Pursuing CA, BCOM (HONS)
      2021-09-27T12:58:15+00:00Added an answer on September 27, 2021 at 12:58 pm
      This answer was edited.

      Fictitious assets are the expenses and losses which are yet to be written off, so they appear in the Asset side of the balance sheet of the relevant financial year because expenses and losses have a debit balance. They are not assets in substance.

      Examples:

      1. Business loss ( debit balance of Profit and loss A/c )*
      2. Prepaid expenses
      3. Discount on the issue of debentures.
      4. Huge promotional expenditure.

      *business loss is shown as a negative figure under the head Reserve and Surplus, when the balance sheet is prepared as per Schedule III of The Companies Act, 2013.

      Deferred revenue expenditures are the expenses incurred for which the benefits are expected to flow to the enterprise beyond the current year. Such expenses are huge and are not written off completely in a financial year. The part of the expenditure which is not written off is shown on the assets side of the balance sheet.

      Examples:

      1. Huge advertisement expense.

      As you can see, there is some similarity between the two. Deferred revenue expenditure can be called a type of fictitious asset as it is shown in the asset side of the balance sheet but it isn’t an asset.

       

      The term ‘fictitious asset’ has a broader meaning than deferred revenue expenditure and also includes the losses such as discounts on the issue of debenture and business loss.

      The difference between fictitious assets and deferred revenue expenditure are as follows:

      Fictitious Assets Deferred Revenue Expenditure
      1 These are no real assets but expenses and losses that are not completely written off in an F.Y. These are expenses incurred from which benefits are expected to flow for more than one accounting period.
      2 It has a broader meaning. It has a narrower meaning.
      3 Examples:- business loss, discount on issue of debentures, prepaid expenses etc. Examples:- huge promotional expenditure etc.
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