what is the meaning of preliminary expenses and how you
shown in balance sheet
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Answer Posted / indranil
Preliminary expenses are those expenses that are incurred
before the commence of business of a limited or a pvt ltd
company. These are basically company formation expenses like
registration charge, memorandum and articles fees and other
registration expenses. This is not a fixed asset and as per
AS-26 the same needs to be charged off in the Profit & Loss
account in the first year of operation. However, when the
income tax computation of the company is made, only 1/5 th
expense becomes allowable in the year of occurence (Sec-35D
of Income Tax act. balance 4/5th part is carried forward and
adjusted with net profit in following four years.
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