Journal entry for Preliminary Expenses ??

Preliminay Exp. -----------Dr.

          To Cash/Bank

This is the entry for the preliminary Expenses & now as per the new rules one has to write off the whole amount of the Preliminary expenses in the first year of the commencement of the activity.

sunil

Hi sunil,

i know treatment of that..

but given journal entry is not correct....

P/L Dr.

To Preliminary Expense A/C

1. Preliminay Exp. -----------Dr. (under current assets)

                            To Cash/Bank

2. Profit/Loss a/c  Dr.

                   To Preliminary Exp. A/C

(1/5 part of prelimnary exp. w/o for every year)

I agree with Pranshu answer

PRILIMINARY EXP.  DR

         TO PARTY A/C                              ( AS EXPS. IS INCURRED RATHER THAN PAID)

P& l A/C    dR.

         TO PRILIMINARY EXPS.            ( WRITE OF1/5 aS PER SECTION 35D OF INCOME TAX ACT1961)

Dear Rahul,

Preliminary exp. doesnot concern with any party...this is nature of like bank/cash payment.

Pranshu is absolutely right.

i dont agree with the above entry because before the entry for written off preliminary expenses one more entry to be passed i.e,

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

As the above question asked about the Prelim exp incurred.So we to book the single enty for prelim incurred : -

 Prelim A/c Dr.

                 To Bank.A/c

In case of prelim exp written off we have to post the below entry : -

Preliminary Expenses Written Off - Dr ( Indirect Expenses)

                                        To Preliminary Expenses

Feel free for suggestions.

Thanks,

Anil

1. Preliminary Expense - Dr ( Current Asset)

                             To Cash\Bank\Party

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

                                        To Preliminary Expenses

for for paying any expenses account is due first as in practice you pay to some person not expenses,if you are paying through cheque then u need to create that person accounts first then after making due then only payment is made.

expenses  A/c    Dr.

   to party

at the time of payment 

party  A/c        Dr 

   to bank

and for writing off expenses 

P&L     A/c      Dr.

  to preliminary exp

( as per AS 26 it has to be written off within a period of 1 year)

and before AS 26 provision it used to be shown under the head of misc expenses under schedule VI.not current assets

however if you make payment by cash then you directly debit the expenses which is very rare in practical due to disallowance under section 40A(3)

1. Preliminay Exp. -----------Dr. (under current assets)

                            To Cash/Bank

2. Profit/Loss a/c  Dr.

                   To Preliminary Exp. A/C

(1/5 part of prelimnary exp. w/o for every year)

I agree with Pranshu I am agree with Pranshu