Deferred Charge

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Dictionary Says

Definition of 'Deferred Charge'

A prepaid expense that is treated as an asset on a balance sheet and is carried forward until it is actually used. Deferred charges often stem from a business making a payment for a good or service that it has not yet received, such as the prepaying of insurance premiums or rent. A company may pay for a year of rent in advance, for example, to receive more favorable terms; this advanced payment is recorded as a deferred charge on the balance sheet. Each month, the company can then use a portion of the funds in its deferred charges account and recognize this amount as an expense on any financial statements.

Also called prepaid expense.

Investopedia Says

Investopedia explains 'Deferred Charge'

Recording deferred charges ensures that a company's accounting practices are operating within the generally accepted accounting principles (GAAP) by matching revenues with expenses each month. A company may capitalize the underwriting fees on a corporate bond issue as a deferred charge, subsequently amortizing over the life of the bond issue. Deferred charges refer to payments that the company has made prior to receiving the corresponding goods and/or services. Deferred revenue, on the other hand, refers to money that the company has received as payments before a product has been delivered.

A prime example of a deferred charge is rent. Consider the case where a company pays a lump sum to its landlord to cover rent for six months. As each month approaches, the company will use a portion of the funds from its deferred charges account and recognize this portion as an expense on its financial statements. This process ensures that revenues for the month are matched with the expenses incurred for that month.
Search results for

'Deferred Charge'

  • Taking The Bite Out Of Annuity Losses

    http://www.investopedia.com/articles/pf/05/AnnuityLosses.asp
    ... In this case, you may have to hold the annuity for a few more years for the surrender
    charge to go away, or take the punch and pay the deferred charge. ...

  • The ABCs Of Mutual Fund Classes

    http://www.investopedia.com/articles/mutualfund/05/shareclass.asp
    ... Class B Shares These shares are classified by their back-end or contingent
    deferred sales charge. These shares are typically good ...

  • Introduction To Annuities: Variable Annuities | Investopedia

    http://www.investopedia.com/university/annuities/annuities6.asp
    ... Contingent Deferred Sales Charge – This is a back-end charge that declines to
    zero over time, usually by 1% per year over five to 10 years. ...

  • Series 26 Study Guide - Investment Companies - Mutual Fund Pricing ...

    http://www.investopedia.com/exam-guide/series-26/investment-companies/mutual-fund-pricing.asp
    ... As long as the investor holds on to the shares beyond the time period during which
    a contingent deferred sales charge (CDSC) is applicable, no sales charge ...

  • Series 6 Study Guide - Investment Companies - Sales Charges and ...

    http://www.investopedia.com/exam-guide/finra-series-6/investment-companies/sales-charges-expenses.asp
    ... As long as the investor holds on to the shares beyond the time period during which
    a contingent deferred sales charge (CDSC) is applicable, no sales charge ...

  • Series 7 Study Guide - Customer Accounts - Costs And Fees ...

    http://www.investopedia.com/exam-guide/series-7/customer-accounts/costs-and-fees.asp
    ... for a certain length of time beyond which the investor would pay nothing, in what
    is known as aB share (a back end load or contingent deferred sales charge). ...

  • Lower Your Fees With Mutual Fund Breakpoints

    http://www.investopedia.com/articles/mutualfund/08/breakpoints.asp
    ... twice. If you fall prey to this practice, you'll end up paying both a
    front-end sales charge and a deferred sales charge. Regulatory ...

  • Getting the Whole Story on Variable Annuities

    http://www.investopedia.com/articles/04/111704.asp
    ... The average annuity will charge somewhere around 1.4% for these expenses, but some ...
    invest some money if you've exhausted all other tax-deferred retirement plan ...

  • How Your Annuity Company Determines Renewal Rates

    http://www.investopedia.com/articles/pf/07/renewal-rates.asp
    ... Suppose you're looking to put money into a tax-deferred annuity and you've ... interest
    rate, the same minimum guarantee rate, the same surrender charge and the ...

  • Series 65 Study Guide - Stocks and Mutual Funds - Mutual Fund ...

    http://www.investopedia.com/exam-guide/series-65/stocks-mutual-funds/mutual-fund-classes-charges-expenses.asp
    ... This is known as a contingent-deferred sales charge. "C" shares: Known as
    "level-load" funds, for which investors pay an annual asset-based fee; ...

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