why prelim expenses are allocated to post incorpn even though incurred pre incorpn?
pls guide me........... advance thanks friends.......
3 Replies
Rahul Gupta
(CA Final Student)
(1780 Points)
Replied 11 March 2009
Hello.
Preliminary expenses are those expenses which are incurred for the incorporation of the company.
So these expenses gives benefit to the company and company writes it off over a no of years since these expenses are huge.
Just as like fixed assets...we purchase fixed assets at the time of formation of the company but deduction is allowed only in the form of depreciation over a no of years..similarly with priliminary expenses and they are treated as fictitious assets till not written off.
Regards
Rahul Gupta.
rahul KKK
(ARTICLED ASSIS)
(93 Points)
Replied 18 March 2009
Thanks friend.........very nice ........now understood..............
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