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what is the meaning of preliminary expenses and how you
shown in balance sheet
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Answer Posted / pavan kumar
preliminary expenses are the expenses which accure at the
time of starting of the business as registration fees.
basically it is amortize as per decided time by the company
and at the time when the expense accure it will treate as
current asset.and written off every year from the profits of
the business.
Ex:- 18000/- expenses for Incorporation Fee
Preliminary Expenses A/c (Under Group Misc Expenses (Asset)
Preliminary Expenses Written off A/c (Under Group Indirect
Expenses)
18000/5=3600
1)Payment Entry
Preliminary Expenses A/c Dr 18000
To Cash/Bank A/c 18000/-
2)Journal Entry
Preliminary Expenses Written off A/c Dr 3600/-
TO Preliminary Expenses A/c 3600/-
Preliminary Expenses Written Off A/c 3600/- will reflect on
Profit& Loss A/c (Indirect Expenses Side)
Preliminary Expenses a/c 14400 will reflect on Balance Sheet
(Asset Side)
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