Accounting Treatment of pre-operative Exp.

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CA Sanjay Baheti (Querist)
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05 May 2011 One of my client being a Pvt.Ltd.Co. established in 2004.However there were no Business activities till 2010. thereafter the company has set up a plant in 2010 & onwards for Manufacturing facilities which is under instalation stage till 2011.Still the company has not commenced it's commercial production.Now whatever expenses incurred being in nature of Salary,Professional exp,Bank's Loan processing charges and all other Adminstrative expenses has to be capilised under Head the Preoperative expenses or not till commencement of commercial production & then allocated to respective Fixed Assets proportionaly.

whether the same is correct or not as per Companies Act.

Pankaj Gandhi Jaiswal

Pankaj Gandhi Jaiswal (Expert)
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05 June 2011 You have to follow AS 10 for this and not companies ACT. Any expenses attributable to asset will be capitalized otherwise charged to PL Account if business decison has been taken only time gap is installation of plant.

Expenses can be claimed after start of business. Start of business has a wider meaning rather than commercial production

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