Despite being classified as an asset, the concept of deferred asset refers to expenses already paid but not yet used. The main objective of all this is not to alter the financial accounts of the companies in the periods in which those disbursements classified as expenses have not been used.
At any time a company can acquire something or pay certain expenses that will not be used in the short term, but will be used over time. While this occurs they will maintain the category of assetsof the company.
Examples of deferred assets
Among deferred expenses, which are usually paid in advance, are stationery, insurance, rent, etc. In some accounts of the General Accounting Plan, a difference is made between deferred charges and expenses paid in advance, although in the end they have the same meaning.
Accounting for deferred expenses
As these assets are used, they are transferred to amortized expense so that the accounting adjusts as closely as possible to reality.
The expenses that have not been used by the They must be in the asset chapter, but once the deferred asset begins to help generate income, it will be incorporated as an expense.
In the case of choosing to transfer the anticipated expenses to the expense and not to the asset, expenses that do not have an apparent relationship with income would be imputed since the unused expense does not help in the generation of income. A good example can be when the rent of a space or office is paid in advance. The fact is that it is paid in January for twelve months of the year and this month it assumes the rental expense for the entire year. Therefore, the income from February to December would not be associated with any expenses and the income from January would be altered by the expenses of other months. This would affect the economic reality of the business.