What is a Deferred Charge?
Deferred charges are expenses that are listed as assets until the goods or services involved in the transaction are actually received. Essentially, a deferred charge is an accounting strategy used to account for expenditures involving advance payments with the expectation that some type of product or benefit will be received in return at some future point in time. From this perspective, a deferred charge functions as the opposite of deferred revenue, which is listed as a liability in the accounting books until the supplier actually provides the goods or services related to the advance payment. A deferred charge involves the advance payment of some type of pending expenditure. One common example of a deferred charge is when rental or leasing fees are paid for several months in advance. The issuer of the advance payment carries the amount of the transaction as an asset in his or her accounting books until the advance rental payment is applied to the actual months covered by the payment.
