Dear sir,
Our company was incorporated on 28-03-17. We are developing a tool that will capture the data from the pipeline of the petrol. It is basically research and development. We have incurred various expenses on tool so far. Tool is ready but no sales revenue is booked in the year 2017-18. It is likely to be sold in the year 2018-19. In 2017-18, we have incurred expenses only. I request the understanding on below points
1. Since, its a newly started company, we have incurred expenses only to develop a tool but it has not been commercialised i.e no sales have been booked in the year 2017-18.
So for the fy 2017-18, are we eligible to claim all the expenses and can we show the carry forward loss?
2. somewhere i have heard that since these are pre operative expenses, needs to be written off over a period of 5 years. I think these expenses should not be considered as pre operative expenses because the operation has already been started. The only thing is tool is not ready for sale and we have not recognised any revenue in fy 2017-18.
3. Can i be allowed all the expenses in the year 2017-18 and carry forward the loss to the next year?
Please suggest.
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Expenses allowability in the first year of the starting of company
Replies (6)
What I think in the above case is that as per AS10 of plant machinery and equipment all the cost incurred on the asset should be recognised as an asset only if it is apparent that future economic benefits from asset will flow to business and it's cost can be reliably be measured.
However as per AS26 all the expenditure incurred on research should be recorded as an expense
So it's quite confusing part but what I think Is you can take it as an asset that is as per AS10 you can go (as asset is tangible asset only)
However as per AS26 all the expenditure incurred on research should be recorded as an expense
So it's quite confusing part but what I think Is you can take it as an asset that is as per AS10 you can go (as asset is tangible asset only)
Thanks for your prompt reply..But the tool which is being developed is our saleable product and not the fixed asset. Hence, i think it should be shown as closing stock and not a fixed asset.
It is clear that these expenses shall not considered as pre operative expenses.
As per AS 26, We can show loss for the fy 2017-18 by claiming all the expenses incurred during FY 2017-18. And carry forward the loss to the next year.
Pls guide..
It is clear that these expenses shall not considered as pre operative expenses.
As per AS 26, We can show loss for the fy 2017-18 by claiming all the expenses incurred during FY 2017-18. And carry forward the loss to the next year.
Pls guide..
No what i think is how can it be a closing stock as the tool is not yet completely ready and it has also not yet become the part of stock
However it can be shown as work in progress
(However I'm not quite sure about this)
However nature of expense would be a big factor in this. as what type of expenditures have been made may also play a role
However it can be shown as work in progress
(However I'm not quite sure about this)
However nature of expense would be a big factor in this. as what type of expenditures have been made may also play a role
Expenses are regular expenses like raw material purchase, salary and wages, travelling, conveyanve and petrol, staff welfare expenses, miscellaneous expenses etc..etc..
THEN I THINK RAW MATERIAL STOCK AT YEAR END CAN BE SHOWN AS CLOSING STOCK
AND OTHERS CAN BE SHOWN AS EXPENSES INCURRED DURING THE YEAR
That means i can show loss for the relevant FY. AND carry forward to next year.
the case pf pre operative expenses would not come into picture...
the case pf pre operative expenses would not come into picture...
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