one company incurred expenditure before opening branch these expenditure like salaries, stipend, advertisement,Interest on loans, rent, security charges etc. these expenses are capitalised at the time of opening branch and the same is transferred to assets like furniture, plant and machinary etc is this procedure is correct??
will it be chrgd to revenue wen business commences ????
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preoperative expenditure ??
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ne replies ??
these are the preoperative expenses and will be written off in 5 years
every year 1/5th of the expenses will be taken to p&L and remaining will be in B/S
for example if preoperative exp are Rs 5000, we will first divide it by 5 and then each year debit 1000 in P&L and remaining amount will be shown in the asset side of B/S under the head misc. exp. For the first year Rs 4000 will be shown in the asset side and in 5 years all the expenses will be charged from P&L.
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