What would be the accounting treatment of Preliminary expenses and inoperative expenses

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Daya (Querist)
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03 November 2024 What would be the accounting treatment of preliminary expenses and inoperative expenses and also for income tax purpose also.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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03 November 2024 Recognize preliminary expenses as a non-current asset (intangible asset) in the Balance Sheet, under the head "Preliminary Expenses" or "Pre-operative Expenses".
Amortize (write off) these expenses over a reasonable period, usually 5-10 years, depending on the company's policy.
Recognize inoperative expenses as a loss in the Profit and Loss Account in the year incurred.
Alternatively, can be treated as a reduction in the Securities Premium Account.