TREATEMENT OF PRE OPERATIVE EXPENSES

Pre operative expenses if of capital nature then shall be added with the cost of the Fixed Asset.

Whereas if the expenses are revenue in nature then charge to P/L A/c.

All Expenses prior to commencing business have to be booked as Pre-Operative Expenses and subsequently has to be allocated on respective  fixed assets in appropriate ratios.

Please note all expenses prior incorporation needs to be separately treated as preliminary expenses.

Hope this will clarify your doubts.

Hi,

Going to start new supermarket, until now we spend almost 13 lakh Rs, for Rent, License fee, Building painting, tiles work, electrical, plumbing, Supermarket shelf and other equipment, and Air condition(Split), Shelf work, Office cabin work, ..........etc.

i put all expenses in Pre operating expenses.   what i will do fixed assets and others.

any one can explain to me deeply, entries......etc.

Thanks and appreciated fro the reply.

Hi,

Going to start new supermarket, until now we spend almost 13 lakh Rs, for Rent, License fee, Building painting, tiles work, electrical, plumbing, Supermarket shelf and other equipment, and Air condition(Split), Shelf work, Office cabin work, ..........etc.

i put all expenses in Pre operating expenses.   what i will do fixed assets and others.

any one can explain to me deeply, entries......etc.

Thanks and appreciated fro the reply.

Expenses that are incurred prior to setting up a business could be Preliminary expenses or Pre-Operative Expenses.  The Pre-Operative expenses have to be capitalized and written off within 5 years as per Sec 35D.  They are to be shown under Miscellaneous Head on the Asset Side.