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What is the different between Prior-Period items and Pre–incorporation expenses

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 ROSHNI asked about 3 years ago

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4 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered almost 3 years ago

Dear Friend, > Prior Period items --Prior period items are normally included in the determination of net profit or loss for the current period. These items arise by the errors and omissions made in previous year having the impact on the financial statements of current year. --Prior Period items are income or expenses which arise in the current period as a result of errors or omissions in the preparation of one or more prior periods. --These exp or income have changing effect in the year when the error is found. --These expenses comes into force after the incorporation of Business. > Pre Incorporation Exp. --Pre incorporation exp are the expenses incurred for the formation of the company. These expenses are formation exp of the company. --These expenses are incurred before company is incorporated. --These must be written of over a period of 5 years. --These are shown in Balance sheet under the head Misc Expenditure.

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Open uri20170510 32134 tcchcu?1494421832 Jitendra Suthar answered about 3 years ago

Hiiii friend...... **Prior Period items** Prior period items are normally included in the determination of net profit or loss for the current period. These items arise by the errors and omissions made in previous year having the impact on the financial statements of current year. Prior Period items are income or expenses which arise in the current period as a result of errors or omissions in the preparation of one or more prior periods. These exp or income have changing effect in the year when the error is found. These expenses comes into force after the incorporation of Business. **Pre Incorporation Exp.** Pre incorporation exp are the expenses incurred for the formation of the company. These expenses are formation exp of the company. These expenses are incurred before company is incorporated. These must be written of over a period of 5 years. These are shown in Balance sheet under the head Misc Expenditure. Regards,

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Data?1494421738 samkit kothari answered about 3 years ago

It may happen with a newly formed company that an existing business is taken over as a going concern as at a date prior to the date of incorporation of the company. In such event, the profit of the business, thus acquired, for the period from the date of purchase till the date of incorporation is called profit prior to incorporation. Unless the agreement with the vendors provides otherwise, such a profit belongs to the transferee company. But profit prior of incorporation should not be regarded as trading profit of the company since the company cannot earn profit before it comes into existence and a company comes into existence only on obtaining the certificate of incorporation. Thus all profits prior to incorporation of a business are capital profits. The apportionment of profit or loss, between the pre­ incorporation and post incorporation periods can be done on any one of the following basis: 1. Time Basis­ The profit or loss for the whole accounting period is apportioned between the periods prior to and after incorporation on the basis of time. 2. Turn over basis­ The profit or loss for the whole accounting period is apportioned between the periods prior to and after incorporation on the basis of turnover. 3. Equitable basis­ The manner of apportionment of the profit or loss between the periods prior to and after incorporation actually depends upon the nature of each particular item. The most equitable method is normally to apportion the gross profit or gross loss of the whole accounting period on the basis of the turnover and the expenses on heir respective merits, those, varying with turnover being apportioned on that basis and those which depends on time being apportioned on the basis of time. What is actually to be done in this case is to prepare a trading account for the whole period and to find out the gross profit or loss in the usual way. The Profit and Loss Account is split up into the two periods ( pre and post incorporation) and all the items appearing in the Profit and Loss Account are then apportioned on the basis of their respective merits.

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Data?1494421730 rohit awasthi answered about 3 years ago

Hii Roshni Prior-Period items When income or expenses arise in the current period as a result of errors or omissions in the preparation of the financial statements of one or more prior periods, the said incomes or expenses have to be classified as prior period items. The errors may occur as a result of mathematical mistakes, mistakes in applying accounting policies, misinterpretation of facts or oversight. Pre–incorporation expenses- Pre–incorporation expenses denote expenses incurred by the promoters for the purposes of the company before its incorporation. Broadly, these include expenses in connection with: ---(a) preliminary analysis of the conceived idea, ---(b) detailed investigation in terms of technical feasibility and commercial viability to establish the soundness of the proposition, ---(c) preparation of ‘project report’ or ‘feasibility report’ and its verification through independent appraisal authority (before giving final approval to the proposition) and ---(d) organisation of funds, property and managerial ability and assembling of other business elements. Thanks

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ROSHNI commented over 1 year ago

good presentation

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