what is pre-operative expenses in pvt ltd company? pls explain in brief
pre-operative expense
(Guest)
Amir
(Learner)
(4016 Points)
Replied 28 December 2009
My friend i guess u are bit confused between two things:-
1) Pre Incorporation Expenses :- These are in the nature of filing fees, ROC Charges, Stamp Paper Charges, Legal Fees, etc which are incurred before the Company has got into existence (i:e TO GET THE COMPANY REGISTERED AND TO BRING IT INTO EXISTENCE IN THE EYES OF LAW).. It can be in case of both Public and Private Co's.
2) Pre Operative Expenses :- This means ALL Expenses which a Company has incurred before the start of Commercial Activities like Production, etc.. It can also be in case of both Co;s (Public and Private)
CS GK Murty
(Company Secretary)
(225 Points)
Replied 28 December 2009
I would like to add while pre incorporation expenses (preliminary expenses) can be written off @ 1/5th annually while pre-operative expenses though reflected in balance sheet, cannot be written off.
Amir
(Learner)
(4016 Points)
Replied 29 December 2009
Yes My friend, till its First Plant is installed and Starts Functioning ALL EXPENSES (REVENUR & CAPITAL) WILL BE BOOKES AS PRE-OPERATIVE EXPENSES (WHICH IS LATER ON TO BE APPORTIONED OVER THE FIXED ASSETS ON SCIENTIFIC BASIS - needless to say that Depreciation will be allowed on those expenses)
For Subsequent Installations(like 2nd , 3rd & so on) the Expenses of Capital Nature would be Covered under "CAPITAL WORK IN PROGRESS" (TILL THE TIME PLANT IS INSTALLED & STARTS FUNCTIONING) AND REVENUE EXPENSES WILL BE CHARGED TO PROFIT & LOSS A/C
Satish Makam
(Asst. Manager - Accounts)
(294 Points)
Replied 07 October 2010
ameer, then what is the accounting treatement for preliminary exp?
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