Preliminary & preoperative expenses

Hi Milan,

The expenses incurred before Incorporation has to shown under Preliminary expenses & the expenses incurred between the Certificate of Incorporation & Certificate of Commencement to be shown under Pre-operative expenses & can be w/o within 5years.

Amber Jain

AS per the revised Schedule VI, there is no such item in the format prescribed for the disclosure of Prelimiary expenses or such expenses which fell under Miscellaneous Expenditure to the extent not written off in the old schedule VI, but as per the revised schedule VI, if there is a conflict between any AS and revised schedule VI format, AS prevails. Hence, such a disclosure is a requirement as per AS and thus we can include the item under seperate head in the revised schedule VI also. 

You can classify the expenditure as Prelimiary Expenses and you can start amortising the same once the business is commenced and the revenue is generated to meet the Matching concept of accounting. 

Anyhow, u may claim the same as an expense as per IT act, 1/5th every year.