Hi
I would like to know
IF PREOPERATIVE EXPENSES ARE INCURRED BEFORE BUSINESS IS COMMENCED THAT CAN BE CAPITALISED.
BUT WHAT WOULD BE ENTRIES FOR EXPENSES INCURRED FOR CREATION OF ASSET AND ACTUAL OPERATING EXPENSES REVENUE IN NATURE. HOW TO KEEP A TRACK IF THIS ALL EXPENSES ALL MAINTANED BY 3 PARTNERS BY PAYMENT OF CASH AND PERSONNEL BANK ACCOUNTS.
I WANT TO KNOW WHICH ACCOUNT SHOULD BE CREDITED ? IF NOT THE EXPENSES PAYABLE ACCOUNT ?
Pre operative Expenses are to be capitalised if it relates to fixed asset and should be charged to the Profit and loss account if it is off revenue in nature.
In my opinion, Accounting entries for pre-operative expenses when business is to commence
(I) Where it is for fixed asset,
1.Pre Operative Expenses Account (Asset) Dr
To Partners Current (Due Since they have paid it, before the commencement of business)
2. Partners Current Account Dr
To Cash or Bank of the Firm/ Company
(II) Where it is revenue in nature
1. Pre operative Expenses Account (under Miscellaneous Exp) Dr.
To Partners Current Account(Due created for paying since it is incurred
2. Profit and loss Account Dr.
To Pre Operative Expenses Account(write off in the year of commencing the business)
3. Partners Current Account Dr.
To Bank Account of the company
Regards,
Sriram.V
CAclubindia
