Pre-operative expenses
This query is : Resolved
28 December 2013
If company is registered in a year 2013 & incurred expenses of 85 lacs in a year which includes Salry,rent ,electricity,depreciation etc expenses against this expenses, Company has generated revenue of Rs. 26 lacs only as compani's sale is on initial stage (Product is new in market) & hence loss of Rs.59 Lacs.
This loss might be for initial 4 to 5 year & then onwards company is going to have in profitable stage.
What to do in such kind of situation in Accounts? Can company capitalise expenses in initial years(As Pre-Operative or in other manner)?
If yes, in which head in Balance sheet? & how same can be write off in P&L a/c after 4 to 5 years.
Kindly reply.
This loss might be for initial 4 to 5 year & then onwards company is going to have in profitable stage.
What to do in such kind of situation in Accounts? Can company capitalise expenses in initial years(As Pre-Operative or in other manner)?
If yes, in which head in Balance sheet? & how same can be write off in P&L a/c after 4 to 5 years.
Kindly reply.
28 December 2013
As per the AS-26, all pre-operative expense are capitalized excluding depreciation, and that to be shown as intangible assets.
No need of set off such expense against income, rather gross such expense to be amortized in 10 year (max, however, shorter period is also allowed.
Further, a detailed notes has to be given to the notes to a/c stating the full details about the same.
No need of set off such expense against income, rather gross such expense to be amortized in 10 year (max, however, shorter period is also allowed.
Further, a detailed notes has to be given to the notes to a/c stating the full details about the same.
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