Preliminary expeneses are the nature of fictitious assets.
These are the formation expenses of the company before any
operation of the busines held. These are transferred to
the profit and loss accounts and written off every year
from the profits of the business. These expenses are shown
on the assets of the balance sheet under the head
Expenses incurred before the commencement of the business
are prelimary expenses and same will be deferred over the
period will be shown under Assets side of balance sheet as
Miscellaneous Expenses (Asset).
Preliminary Expenses is the expenses incurred before the
commencement of the company that beared by the promoters of
the company for its incorporation. As it is considered as
one of the fictitious asset of the company and is treated
as deffered revenue expenditure because it derives benefits
in the long run and thus written off every year on the
asset side of the balance sheet
Expenses incurred prior to the incorporation of a company
are called preliminary expenses. They are ficticious
assets appearing on the ASSETS side of the Balance Sheet.
Every year a protion of them are written off from the
profit and in the Balance Sheet the total amount of
preliminary expenses is reduced by the amount of expenses
Preliminary expenses are the expenses incurred for the
formation of a company like registration, expenses related
to MA&AA. These expenditures are shown on balance and will
be reduced against profit of the company every year until it
preliminary expenses is come under ficticious assets.Its
entry comes under assets side only & transfered to p&l a/c
which is writen off frm the profit of the
business.preliminary expenses are those expenses which
incuured before commencement of bussiness.
Preliminary Expenses are to be written off out Securities
Premium Account or it may be written off out of the Profit
& Loss A/c gradually over some period. The balance left of
preliminary expenses is to be shown in the asset side of
the balance sheet of the company under the heading
of ‘Miscellaneous Expenditure’.
Preliminary Expenses are incurred to form a company like
Fees in relation to RJSC (Registrar of Joint Stock
Companies), Consultancy paid to formation consulant, Fees
related to obtain Trade License etc. These are presented at
Balance Sheet as Fictitious Assest under the head
Miscellaneous Expenses. These should be amortize as per
over the years but IAS recommend to amortize these within
the first year of operation.