deferred charge

  

Definition

Cost that is accounted-for in the future (and not in the accounting period in which it is incurred) because of its anticipated future benefit, or to comply with the requirement of matching costs with revenues. Deferred charges include start up costs, financing costs for long-term debt, costs of advertising campaigns, etc., and are carried as a non-current asset on the balance sheet pending amortization. in contrast to prepaid expenses (such as insurance, interest, rent) deferred charges usually extend over a long period (often five years or more) and occur infrequently. Since they have no physical substance (cash realizability) and cannot be used in reducing total liabilities, deferred charges are subtracted from the total assets of the firm when computing financial ratios.

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