Profit prior To Incorporation
This query is : Resolved
NEHA V SHARDA
(Querist)
30 August 2009
Please let me know that Why do we transfer the profit before incorporation to Capital Reserve account?What if there is a loss?
Manmohan ACA, CS
(Expert)
30 August 2009
Profit prior to incorporation is not a revenue profit. Since it arise before incorporation of company out of assets purchased so it can not be transferred to P?L, however it is profit of capital nature and the profit will not be available for distribution as a dividend among the members of the company.
loss on it is debited to the Goodwill Account, assuming that you have paid more (i.e. loss amount )for goodwill
loss on it is debited to the Goodwill Account, assuming that you have paid more (i.e. loss amount )for goodwill
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