Profits or Losses Prior to Incorporation

Prejith (Pursuing CA) (92 Points)

07 December 2010  

In case of Profits prior to incorporation, we differentiate between the transactions relating to pre and post incorporation. My doubt is that:

1. Are the transactions relating to pre incorporation period the outcomes of preliminary contracts ?

2. If yes to the above, then will the ratification of such preliminary contracts by the company affect the treatment of profit or loss that is usually followed during the pre-incorporation period ?