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What is the treatment for PRELIMINARY EXPENSES?
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Answer Posted / shajimon m.v.
Priliminary expenses are those expense which are met prior
to the formation of a company or firm. These expense are
having a non recurring feature and also not related to the
day to day operation of the company. The amount expended
towards: preparation of Feasibility Report, Prospectus,
Memmorandum & Articiles of Association, issue of shares,
conducting Marketting Survey , Legal expense for
documentation and huge advertisements. These expenses are
to be shown in Balance sheet asset side as "Priliminary
expneses" and a fixed percentage of the total amount can be
written off every year by debiting to the Profit & Loss
account.
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