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Please help!! Help!!! Help!!!!

preeti (student) (143 Points)

17 February 2010

How to show the pre-operative expenses of Profit & Loss a/c in ITR-6? Since the company has not started it's business yet, it cannot carry forward its loss occured due to the pre-operative expenses. But if the BP-Schedule is filled with the expense figure which results in loss in P&L a/c, the figure is automatically carried to the CYLA and BFL schedules. Please help!!!

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10 Replies

Amir (Learner) (4016 Points)
Replied 17 February 2010

Dear Preeti,

Since Co. has not started it's business that means there will not be any figure in Profit & Loss a/c...

Pre Operative expenses will be carried forward in the Balance Sheet under Misc. Expenditure....

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Chetan (Study) (106 Points)
Replied 17 February 2010

Ya it would be shpwn under miscellaneous expenditure and no effect on profit or loss

preeti (student) (143 Points)
Replied 17 February 2010

But Amir,

While preparing the Balance Sheet and Profit & Loss A/c, we have shown the expenses in Profit & Loss a/c. Now if we do not enter expenses in Profit and Loss a/c of ITR-6, there will be difference.. So what is the way out?

Amir (Learner) (4016 Points)
Replied 17 February 2010

Dear Preeti,

R u sure Balance sheet & P/L a/c have been prepared correctly.........

What eslse, the total amount of expenses u can show in the columm of disallowances u/s 37(1)..By doing this there will be "Nil" Income under PGBP & consequently NO Carryforwad/ Broughtforward Loss.....

CA lakshmikanth (Chartered Accountant) (238 Points)
Replied 17 February 2010

Dear preeti

First we understand journal entries of pre-operative expenses

First entry: Staff welfare/Travelling exp/ conveyance A/C DR

Cash/ bank CR

Second entry : Pre operative exoenses ( assets) A/C DR

Staff welfare/Travelling exp/ conveyance CR

So here expenditure account nulifiled and no impact of P&L account

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Jatin Singh Negi (Country Analyst ) (505 Points)
Replied 17 February 2010

See pre operative expenses are only shown in balance sheet under the head miscellaneous expenditure but when the company starts its operation the part one fifth of pre operative expenses will be written off every year until the whole expense gets over

preeti (student) (143 Points)
Replied 18 February 2010

The Profit and Loss account have been prepared according to Companies Act. If we do not show the expenses in Profit and Loss account, where should we disclose it? And is the disclosure u/s 37(1) proper? what about the future consequences?

Ameet (L) (1678 Points)
Replied 18 February 2010

It will not go to P & L A/c. Its has to be under Misc. Expenditure head in Asset side. U cant claim exps until business start. I think there might be some mistake in preparation of BS.

RAMANJU (here to updating the knowledge) (485 Points)
Replied 18 February 2010

What is effect of AS 26, Accounting For Intangible Assets with regard to pre-operative expenses? Whether to be recognised as assets or to charge to profit and loss account. When you are charging to P& L account the loss will be carry forward in the Accounting Books.