It can be written off out of the P&L account equally over some period, for BS the total amount of preliminary expenses is reduced by the amount of expenses written off. The balance left of preliminary expenses will be shown in the asset side of the BS of the company.

What are preliminary expenses?

Preliminary expenses are expenses which the promoters of a company incur at the time of incorporating the company. Generally, preliminary expenses are disallowable on the ground that they are of a capital nature or incurred prior to the setting up of a business.

What are preliminary expenses in balance sheet?

The expenses incidental to the formation of a company also regarded as a preliminary expense. These are considered deferred revenue expenditure. A part of these expenses is debited every year to the profit and loss account.

What are examples of preliminary expenses?

The expenses which are incurred before the incorporation of a company or the start of a business are known as preliminary expenses. These include expenses such as legal or professional fees, logo designing cost, printing, registration fees, stamp duty, etc.

What is the journal entry for preliminary expenses?

As stated above the preliminary expenses can be written off in five years, to record that following entry should be passed : Debit the Preliminary expenses written off the credit the preliminary expenses A/c with the amount which is equal to 1/5th of the total preliminary expense booked as per point no 1.

When do preliminary expenses have to be paid?

So, preliminary expenses are those primary expenses which are paid before the incorporation of company. So, when company comes into existence after incorporation, it is the duty of company to repay all these expenses to its promoters.

Where are unamortised preliminary expenses on a balance sheet?

Year of amortisation have to be decided by the proprietor of the business depending on the nature of business. The unamortised preliminary expenses will be shown in the asset side of the balance sheet.

How are preliminary expenses treated in Indian Accounting?

Accounting for preliminary Expenses Normally preliminary expense are treated as intangible asset and shown on the asset side of the balance sheet under the head Miscellaneous asset. The preliminary expenses are amortized or written off in five years for the purpose of Income Tax in India.

How long are preliminary expenses amortized in India?

The preliminary expenses are amortized or written off in five years for the purpose of Income Tax in India. How ever Accounting standard 26 says a period 10 years for writing off intangible asset.