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This query is : Resolved 

Difference between prepaid and preliminary expences

Preliminary exp-: means expenses incurred before formation of an entity.

prepaid Exp.-: Prepaid exp incurre after formation of entity, advance payment of exp
such as insurance paid for 2 years..1 year insurance exp treated as prepaid expenses for current financial year.

Agree. Preliminary exp. are those exp. which are incurred before an entity or company comes into existence or start doing work then expenses incurred to make entity operational. Like documention, legal fees etc.

Prepaid exp. are advance payment for an expense after entity is formed. Suppose u have a insurance policy starting from 1.10.11 to 30.9.12. then insurance exp. paid from 1.4.12 to 30.9.12 is prepaid for the year ending 31.3.12

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