Sales before incorporation of comapnay

This query is : Resolved

saikiran (Querist)
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06 August 2012 Dear experts,

Company has incorporated in April 2011 but it has started commercial operations from Dec 2010 onwards. It has raised invoice for the services provided from Dec 2010 to March 2011 to the customers.

Nature of industry of the company is Service Industry.

Please tel me what will be the legal implications in this regard?

Also suggest the accounting treatment for the profit earned and income received during the pre incorporation period?

Amol S Joglekar

Amol S Joglekar (Expert)
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06 August 2012 Issuing bills on the entity which is not incorporated at all.... you need to face the music. Vicarious liability may arise. Pay the tax first if you have collected the same and then think of profit prior to... etc. kind of accounting standards.

saikiran

saikiran (Querist)
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06 August 2012 Dear Amol,

Thanks for the valuable reply.
Please inform me what are the consequences and liability that will arise in this case, and company had paid the service tax collected to the government.

And how the income can be treated in the financial statements.

Amol S Joglekar

Amol S Joglekar (Expert)
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06 August 2012 Pass the resolution in the first general meeting to that effect and RATIFY the activities made by the company prior to incorporation.

saikiran

saikiran (Querist)
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06 August 2012 Dear Anmol

Thanks a lot for your reply.

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