The Various Expenses paid by the director of the company towards the formation of the new private limited company.
Which head we should account in the new company books either preliminery expenses head or pre-operative expenses head
The treatment of expenses paid by the director in the company books?
Kindly clarrify and do the needful
Preliminary exp arethose imp exp required to be paid before formation for formation of comapany and should be debited to preliminary exp and should be written off of a specific period but all such exp should be direclty in connection wit forming of company and in promoters nature or like .
While preliminary expeses essentially associate with activities involved in the formation of the company, pre-operative expenses are those which are connected with actions that are required for start up of operations. Pre-operative expendiure can therefore be capitalised by apportionment/allocation to assets which are the subject matter of operation. Preliminary expenditure are written off as revenue and set off when the company generates profits. For more details please look into AS-26.
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