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Pre- incorporation exp.

Kalpesh (Business) (73 Points)

19 August 2011

Please any one tell me how to show pre-incorporation Exp. in Balance sheet and distribution for Assets

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Amit Gupta (Loosening Myself) (1508 Points)
Replied 19 August 2011

As per para 56 of AS 26,

"In some cases, expenditure is incurred to provide future economic
benefits to an enterprise, but no intangible asset or other asset is acquired or
created that can be recognised. In these cases, the expenditure is recognised as an expense when it is incurred. For example, expenditure on
research is always recognised as an expense when it is incurred (see
paragraph 41). Examples of other expenditure that is recognised as an
expense when it is incurred include:
(a) expenditure on start-up activities (start-up costs), unless this
expenditure is included in the cost of an itemof fixed asset under
AS 10. Start-up costs may consist of preliminary expenses
incurred in establishing a legal entity such as legal and secretarial
costs, expenditure to open a newfacility or business (pre-opening
costs) or expenditures for commencing new operations or
launching new products or processes (pre-operating costs);

The expenses should be written off in P/L a/c in the year they are incurred.