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preliminary expenses of incorporation

rani rai (student) (9 Points)

10 October 2017

can we written off the preliminary expense from the first year of the incorp. if not then from which yr we strted

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Shivendra Tripathi (Student) (39 Points)
Replied 11 October 2017

these expenses generally include:
legal cost in drafting MOA and AOA.
capital duty and other fees on registration of the company.
cost of statutory and other company charges for seal.
all the expenses specified above shall not be carried forward to subsequent year. it means preliminary expenses mist be writeoff in the accounting year in which they are incurred.

Shivendra Tripathi (Student) (39 Points)
Replied 11 October 2017

rani rai (student) (9 Points)
Replied 11 October 2017

whole amount should be write off in first year only or we should write off 1/5 of that expenses every year
and company is not doing business in its first year then wat is the criteria

rani rai (student) (9 Points)
Replied 11 October 2017

whole amount should be write off in first year only or we should write off 1/5 of that expenses every year
and company is not doing business in its first year then wat is the criteria

Shivendra Tripathi (Student) (39 Points)
Replied 11 October 2017

AS 26 dealing with intangible assets covers preliminary expenses as well. The period over which these preliminary expenses are to be amortised is best left to the judgment of the directors of the company. AS 26 suggests writing off intangible assets over a period of 10 years, though a different period is permissible if it is justified in the opinion of the management. It is a common practice to write off these preliminary expenses in a period of five years, though there is no legal provision to this effect. A company can as well write off its preliminary expenses in the same year as it incurs.