Answer Posted / ramesh

(i) Preliminary expenses are the expenses incurred for the
formation of an entity like registration, expenses related
to MA&AA and etc.
(ii) As per Accounting Standard 26 "Intangible Assets", Amounts incurred towards Incorporate an entity (i.e. Start-up costs) will not meet the asset recognition criteria and should be transferred to the P&L A/c in the year in which it is incurred. But for the purpose of calculating Income tax payable, we should add back the entire amount debited to P&L a/c and should deduct 1/5th of the amount allowable U/s 35D of Income tax Act, 1961 and should calculate the deferred tax.

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