Preliminary and pre operative expenses

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Querist : Anonymous

Querist : Anonymous (Querist)

15 September 2012 A pvt company was incorporated in dec 2011. There was no business during year 2011-12.
total exp incurred upto 31.03.2012 Rs. 28500/- includes:
Audit fees (provision) Rs. 2000
AOA, MOA, ROC filing fee Rs. 25500
Telephone bill Rs. 1000

how to deal with exp.

(1) whether to show Rs. 3000 as loss or as pre operative exp.if i show it prelimiary when to write off it at time of profit or i should write off 1/5 portion upto 31.03.2012.
(2) How to treat payment for AOA, MOA, Rs. 25500. if i treat it as pre operative exp.
whether it would be capitalised or write off in near future.

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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15 September 2012 As per AS-26 Pre-operative expenses is to be written off in the year of expense itself.
It will be written of totally in that year.
In income tax 1/5th of Rs. 25500 will be allowed in the current year. if the amount is not material then full amount can be claimed.

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Querist : Anonymous

Querist : Anonymous (Querist)

17 September 2012 Thanks sir
As per your suggestion the treatment for both preliminary and pre operative would be same. means whole expenses will be write off in the year itself.

sir please correct me, can we treat it as follows:
1. preliminary exp write off 1/5 in current year. because of write off there will be loss in balance sheet.
2. like prelimiary exp , pre operative exp to be write off 1/5 during current year.

balance portion to shown in balance sheet.

As per revised schedule :
(a) Profit & loss Dr. Rs. 5700 (1/5 of whole expenses) part of reserve & surplus
(b) Rs. 22800 be shown as non current assets.

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CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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17 September 2012 I said the whole of the amout will be debited to p&l account as per AS26.
Accordinly, Rs. 28500 will be debited to p&l account.