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Need to know the treatement of Pre-Operative Expenses and
preliminary expenses. How would you differentiate these
two?
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Answer Posted / arun
PRELIMINARY EXPENSES ARE THOSE EXP WHICH ARE INCURRED
BEFORE THE FORMATION OF THE COMPANY. EXAMPLE COMPANY
FORMATION EXPENSES INCLUDING FEES PAID TO PROFESSIONALS .
WHEREAS THE PREOPERATIVE EXPENSES ARE THOSE EXPENSES WHICH
ARE INCURRED BEFORE START OF COMMERCIAL OPERATIONS BY THE
COMPANY.
THE PREOPERATIVE EXPENSES ARE TREATED AS ADEFEERRED REVENUE
EXPENDITURE AND AMORTISED OVER A PERIOD OF 5-7 YEARS.
THE TAX TREATMENT IS AS DONE FOR OTHER DEFERRED EXPENDITURE
AND THE PROFIT & LOSS A/C IS DEBITED FOR THE APPORTIONED
ANNUAL AMOUNT EVERY YEAR.
| Is This Answer Correct ? | 5 Yes | 7 No |
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