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why do we take preliminary expenses into asset side?
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Answer / h.r. sreepada bhagi
Preliminary Expenditure - is shown under Miscellaneous
Expenditure (To the Extent Not Written off of Adjusted) on
the Assets side or under Application of Funds in the Balance
Sheet. It represents the amounts spent on getting the
company formed & registered & the benefits of this is spread
over the life of the company. If this is charged to the
Profit & loss Account in the year when it's incurred, True
Profit/Loss is not arrived at for that year, as the expenses
are overstated.
In order to even this effect, the expenditure is written of
over a reasonable period of time (Eg. 5 yrs. or 10 years).
Since it is in the nature of an intangible asset, it will
appear as an asset, till it is fully charged off to Profit &
Loss A/c.
| Is This Answer Correct ? | 76 Yes | 13 No |
Answer / prabakaran
Preliminary Expenses are to be written off out Securities
Premium Account or it may be written off out of the Profit &
Loss A/c gradually over some period. The balance left of
preliminary expenses is to be shown in the asset side of the
balance sheet of the company under the heading of
‘Miscellaneous Expenditure'.
preliminary expenses example;expenses incurred for get
company register, and underwritting commission.that,s why
the preliminary expenses coming under asset side.
| Is This Answer Correct ? | 47 Yes | 15 No |
Answer / gangadhar das
Preliminary Expenditure are those expense which occured
before the commencement of a company, that's y it shown
under Miscellaneous expenditure on the assets side of B/S.
Preliminary Exp:- expenses incurred to register a company,
and underwritting commission etc.
| Is This Answer Correct ? | 12 Yes | 13 No |
Answer / gopi
this exp are incurred before company estabilsh so we are
going right of for some more period from prafit and loss
accout, remaining balance as per accountig rules all
closing entris should be shown in asset and liabilitis
based on that this is not out side liability and you can
treat as prepaid exp because usefull life for some more
period so we are showing this one in asset side
| Is This Answer Correct ? | 7 Yes | 9 No |
Answer / sumitra.raghavan
preliminary expense is a fiticious asset....benefit was
derived from it in the past...now it has no economic
value....but profit in the past was not sufficient to write it
off so it is carried forward
| Is This Answer Correct ? | 9 Yes | 15 No |
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