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Profits or loss pre and post incorporation
Preincorporation profit is of a capital nature.Why?
Replies (5)
Because at the time of pre-incorporation there was no existance of business & hence the amount and nature of expenditure incurred will be capitalized.
By business did you mean the existence of a legal entity or operations?
Business means activities after incorparation of entity. i.e. activities after certificate of incoporation, commencement of business for sale or purchase etc.
Actually I am asking about distribution of profit or loss when a running business is acquired by a company. In that case, there is a gap between the date of acquisition and date of incorporation. There is sales and purchase even before incorporation also. So there is profit.
Because Company is not in existence to treat it as Revenue so head it under Capital
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