29 July 2017
You are right but I am asking about the treatment in the books of accounts maintained in company law not about filing return......I want to know whether there is any provision in company law or in any accounting standard which says that it is mandatory to amortise in 5 installments...
29 July 2017
The Companies Act & Schedule VI provides for recognition of 1/5th of the total preliminary expenses each year for five consecutive years. To record this transaction following accounting entries are passed.
To records the preliminary expense incurred prior to incorporation of the legal entity following entry should be passed on the first day of the incorporation : Debit the preliminary expenses A/c and Credit the Profit & Loss A/c for the amount determined as preliminary expenses.
As stated above the preliminary expenses can be written off in five years, to record that following entry should be passed : Debit the Preliminary expenses written off the credit the preliminary expenses A/c with the amount which is equal to 1/5th of the total preliminary expense booked as per point no 1.
CAclubindia
