Pre-Operative Expenses

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Prasanna Bhat (Querist)
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26 September 2008 Last Year our subsidiary was formed and the expenses was treated as Pre-operative expenses. This year they have decided to close the company, how to treat the pre-operative expenses what is the entry we need to pass.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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26 September 2008 The expenses of your company or that of subsidiary?

Prasanna Bhat

Prasanna Bhat (Querist)
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26 September 2008 I mean to say our subsidiary company has been closed so i want know how to treat pre-operative expenses and what is the entry for it

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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26 September 2008 I am asking whether the expenditure has been incurred by your company or the subsidiary?

Prasanna Bhat

Prasanna Bhat (Querist)
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26 September 2008 The expenditure has been incurred by our subsidiary company and how abt the fixed assets purchased by the subsidiary company how to treat that.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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26 September 2008 The preoperative expenditure in such a case are allocated to Fixed Assets. If the realisable value of fixed assets is less than the book value after allocation of Preoperative expenditure, then impairment results. On the other hand if the Fixed assets can fetch the full value and is retained in book value for further disposal.