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Need to know the treatement of Pre-Operative Expenses and
preliminary expenses. How would you differentiate these
two?
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Answer / arun
PRELIMINARY EXPENSES ARE THOSE EXP WHICH ARE INCURRED
BEFORE THE FORMATION OF THE COMPANY. EXAMPLE COMPANY
FORMATION EXPENSES INCLUDING FEES PAID TO PROFESSIONALS .
WHEREAS THE PREOPERATIVE EXPENSES ARE THOSE EXPENSES WHICH
ARE INCURRED BEFORE START OF COMMERCIAL OPERATIONS BY THE
COMPANY.
THE PREOPERATIVE EXPENSES ARE TREATED AS ADEFEERRED REVENUE
EXPENDITURE AND AMORTISED OVER A PERIOD OF 5-7 YEARS.
THE TAX TREATMENT IS AS DONE FOR OTHER DEFERRED EXPENDITURE
AND THE PROFIT & LOSS A/C IS DEBITED FOR THE APPORTIONED
ANNUAL AMOUNT EVERY YEAR.
| Is This Answer Correct ? | 5 Yes | 7 No |
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The following are the list of Balances of SUNSHINE Company as at 1.2.2012 RM Land and building 450,000. Furniture and Fittings 35,000. Office Equipment 25,000. Motor Vehicles 75,000. Inventory 5,000. Trade Receivables 12,000. Trade Payables 8,000. Bank Loan 200,000. Bank 13,000. Cash in Hand 1,000. Capital 408,000.
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