Online submission 15g

Dear Narendra,

                   The profit or loss of pre-incorporation period is transferred to Capital Reserve because it is not the profit of the company. Profit earned prior to incorporation of company is always t/f to Capital Reserve.

As you know that the period is divided into two parts:-

1. Pre-Incorporation Period and
2. Post-Incorporation Period 

Profit or Loss earned in Post period is only the profit of the company. Hence. t/f to profit & loss A/C.

In simple words,    

Pre -period mein kamaya hua profit - PAPA ka hai (i.e., Inheritable)

But Post -Period mein kamaya hua profit - Beta ka hai (i.e., Khud ka)- Company Ka

I hope this will help in order to understand the concept.

Regards

SONU JHA