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Pre operative expenses?

kartik_somu (B.Com, ACA, CISA, CIMA) (1665 Points)

22 November 2007

Can anyone explain me what pre operative expenses are?

How are they to be treated for accoutning purposes?

Capitalise or charge to revenue?

When should they same be done?

At the year end or commencement of commercial production.

In my auditor office, preoperative expenses were capitalised prior to the date when the first sale invoice is raised?

Is it right?

Can raw materials purchases also be capitalised as pre operative expenses?

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4 Replies

(Guest)

Yes, pre-operative expenses to be capitalized after commencement of commercial production and before 1st sale. Raw materials purchased before the date of production to be treated as stock for production and it need not to be capitalized.

(Guest)

Pre -opretaive exp.are those which are incurred prior to sale. these exp should be capitalised with respect their cost . at the year of sale these exp are deduct from their cost.and diff is profit

Lavanya Chiyadu (Chartered accountant firm) (20 Points)
Replied 14 October 2008

How to treat preopeartive expenses for return of inome purposewhich are written off during the current year financials

Lavanya Chiyadu (Chartered accountant firm) (20 Points)
Replied 14 October 2008

Dear Sir/ Madam,

Please let me know how to give treatment in Return of Income The preoperative expenses written off during the current year and which are of revenue in nature.