Preliminary expenses are costs incurred during the formation of a company, such as legal and registration fees. These are classified as miscellaneous expenditure (or deferred revenue expenditure) and are typically written off over a period of years against profits.

Deferred revenue expenditures are large costs incurred in one period that provide benefits over several future periods. Legal expenses for defending a breach of contract are considered normal revenue expenses related to current operations, as they do not create a long-term asset or provide future economic benefits beyond the current period. Therefore, they are charged to the profit and loss account immediately.

Advertising for a new product is often a heavy, non-recurring expense that provides benefits over several future accounting periods. Because the benefit is not exhausted in the current period, it is classified as a deferred revenue expenditure. This allows the business to amortize the cost over the years in which the advertising is expected to generate additional revenue.

Deferred revenue expenditure refers to heavy initial costs that provide benefits over several future accounting periods. Since the advertising campaign for a new product is expected to generate sales beyond the current year, the cost is spread out or amortized over the period of expected benefit rather than being fully expensed immediately.

A heavy advertisement expense for a new product is classified as Deferred Revenue Expenditure. This is because the expenditure is revenue in nature but provides benefits that extend beyond the current accounting period. Consequently, the cost is amortized over several years rather than being fully charged to the profit and loss account in the year of incurrence.