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Treatment relating to preproduction

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This query is : Resolved

PREM KUMAR (Querist)

16 July 2009 Hi everone, I have a query regarding accounting treatment towards preproduction expenses. I have taken this as a deferred expenses. Now I want to write off this expense after considering the Accounting Standards. Can anyone please help me regarding this.

Prakash Kanaka M.P.

Prakash Kanaka M.P. (Expert)

29 July 2009 Normally preproduction expenses can added to Fixed assets. Their by increase the value of fixed assets and write of preproduction expenses.

Eg. If your preproduction exp is 10.00 Lacs
Machine A = 30 Lacs
Machine B = 10 Lacs
Machine C = 60 Lacs

10/100 x 30 = 3 Lacs can be added to M/c A
10/100 x 10 = 1 Lacs can be added to M/c B
10/100 x 60 = 6 Lacs can be added to M/c C

Credit 10 Lacs to prepoduction expenses.
For which you have to declare the date of your commercial production.

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