How do I treat expenses incurred before the start of the business? sole proprietorship business...

Expenses incurred till the date of Company formation are treated as preliminary expenses and shown in the asset as as miscellaneous expenditure.The expenses incurred from the date of Company formation till the date of commercial production are treated as preoperative expenses.The preoperative expenses are allocated to fixed assets after commercial production.

income under the head house property

Pre operative expenses can be calptalised upto the date of commencement of production. The total expenses transfered to pre opeative expense account should be shown on the assets side of B/s under Misc expense not W/o.

A company was incorporated in 2005.its production started on 2008-09.during the period 2005-2008 it incurred expenditure on plants and machinery,furniture salary wages and other general expenses.As the P/L is not made for the pre operative period the same is  capitalized until the production begins.now the question is whether the whole of the expenses capital or revenue in nature should be included under pre operative expenses  and under what head of assets side of balance sheet(capital WIP or Misc expenditure).Further is such expenses allowed as deduction  under income tax act and in which year it is allowed .what is the relevant AS or companies act section.

 Hello Experts,

Suppose I purchase a new  machinery  and I made certain amount for its insurance .

Then should the expense made on insurance of that machinery  be capitalised along with the cost of machiney?

thanks,

What is pre-operative expenses and what is the treatment in capital work in progress

Hi, General Insurance on any asset will normally be for an year. Any expenditure incured as such will be revenue expenditure and should not be capitalized. Book the expenditure for the current year and balance show it as prepaid for next year.

Hi Dheeraj,

When you purchase any assets and bear any additional cost will be added into the total capitalised cost , but it should be remember that its happend only first time expenses.

Thanks

Deepak Rastogi

Please reply if any body knows about Treatment of preoperative expenses done by real estate builders and developers ......

How they can show there expenses in the books before recognition of income........

if they are not earning profit ,they can show there expenses as loss in the ITR

or just capitalize them as preoperative expense and write off at the time of revenue recognition as per AS 9. 

Please reply if any body knows about Treatment of preoperative expenses done by real estate builders and developers ......

How they can show there expenses in the books before recognition of income........

if they are not earning profit ,they can show there expenses as loss in the ITR

or just capitalize them as preoperative expense and write off at the time of revenue recognition as per AS 9. 

hi

pls let me know the treatment of preoperative expenses related to site development as if that property was sold out immediately in the same year. but still preoperative expenses are standing in my balance sheet...can i w/off the whole amount of preoperative expenses in the next year .??? or in some ratio????

Thank You