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Writing of preliminary expenses

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Querist : Anonymous

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Querist : Anonymous (Querist)
09 June 2015 Why are we doing preliminary expenses writing off instead of whole amount debited of p&l A/c?
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CMA MALHAR BEHERA

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CMA MALHAR BEHERA (Expert)
10 June 2015 Accounting for preliminary Expenses:

The benefit of the preliminary expenses is long-term so it is treated as intangible asset as per AS-26 and shown in Balance sheet under Misc. assets. These expenses will be written off in 5 equal year installment in profit and loss A/c. You can also transfer whole amount in single year but for income tax purpose 1/5 of the amount will consider.

Accounting Entries:
1. Preliminary Expense - Dr (Current Asset)
To Cash\Bank

2. Preliminary Expenses Written Off - Dr (Indirect Expenses)
To Preliminary Expenses

3. Profit & Loss A\c. - Dr
To Preliminary Expenses(1/5th)
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Querist : Anonymous

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Querist : Anonymous (Querist)
10 June 2015 Thank you very much sir. Is it matching Concept for Writing off?
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