IF A NEW BRANCH IS GOING TO BE OPEN ON 17/3/13.THE EXPENSES PAID BEFORE THE OPENING OF THE BRANCH LIKE RENT,SALARY ,TELEPHONE EXP SHOULD BE CAPITALISED (AS PER THE CONCEPT OF PRE-INCORPORATION CONCEPT) OR SHOULD BE CHARGED TO P/L A/C IN THE SAME ACCOUNTING YEAR.PLEASE POST YOUR VALUABLE COMMENTS.PLEASE ALSO ADVICE THE TAX IMPLICATION WHETHER THE SAME WOULD BE ALLOWED WHILE COMPUTING THE GROSS TOTAL INCOME IN INCOME TAX.
THANK YOU,
Pre operative expenses can be write off in next five year period. You should pass entries in books as follows:
On First Year (When business started)
Pre operative expenses A/c Dr.
Expenses head A/c Dr.
To Bank/cash A/c
In each following years
Expenses A/c Dr.
To pre operative Expenses
Please also note that the Account head 'Pre Operative Expenses will be shown in Asset side of Balance sheeet and the expenses account in P/L account.
Rajesh
CAclubindia
