Aarthi.P
asked
Is it mandatory to write off preliminary expenses in the first year itself as per AS-26 .? If it is amortised over 5 years., is it correct to show the unamortised amount as Current assets?
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Aarthi.P commented
over 3 years ago
Thank you all for replying
2
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Urmil
answered
The benefit of the preliminary expenses is long-term so it is treated as intangible asset and shown in Balance sheet under Missilinous assets. These expenses will be written off in 5 equal year instalment in profit and loss A/c. you can also transfer whole amount in single year but for income tax purpose 1/5 of the amount will consider.
Accounting Entries:
1. Preliminary Expense - Dr (Current Asset)
To Cash\Bank
1.Preliminary Expenses Written Off - Dr (Indirect Expenses)
To Preliminary Expenses
2.Profit & Loss A\c. - Dr
To Preliminary Expenses
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Preliminary expenses treatment.
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The benefit of the preliminary expenses is long-term so it is treated as intangible asset and shown in Balance sheet under Missilinous assets. These expenses will be written off in 5 equal year instalment in profit and loss A/c. you can also transfer whole amount in single year but for income tax purpose 1/5 of the amount will consider.
Accounting Entries:
1. Preliminary Expense - Dr (Current Asset)
To Cash\Bank
2. Preliminary Expenses Written Off - Dr (Indirect Expenses)
To Preliminary Expenses
3. Profit & Loss A\c. - Dr
To Preliminary Expenses
SONIYA commented
over 3 years ago
2. profit & Loss A/c-------Dr To preliminary Expenses written off A/c not 2.Profit & Loss A\c. - Dr To Preliminary Expenses
