What is the treatment of preliminary expenses?

Preliminary expenses are considered as prior expenses before the beginning of business and it will be treated just like depreciation but the name is using as amortization. It has the same treatment of depreciation. Preliminary expenses are the expenses that spent by the promoters before the incorporation of company.

How will you deal with preliminary expenses in final accounts of companies?

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.

What is the treatment of prepaid expenses in dissolution of partnership?

Prepaid expenses are debited to Realisation A/c at the time dissolution. E.g. Prepaid Insurance is an asset. Hence, debited to Realisation A/c at the time dissolution.

How much is the disallowed portion of preliminary expenses?

The maximum deductible under Section 35D cannot be over 5\% of the cost of the project. In the case of a company, the maximum deduction cannot exceed 5\% of the cost of the project or the capital employed in the business of the company.

How do you treat a partners loan in dissolution?

2] Partner’s Loan Account We do not transfer the loan by a partner to firm to Realisation account, it remains in its account itself. At the time of settlement, i.e., payment of liabilities, we pay partner’s loan after paying the outside liabilities but before payment of capital.

What is the treatment of prepaid insurance in Realisation account?

What is the treatment of outstanding expenses in cash flow statement?

(i) Outstanding/Accrued Expenses: The outstanding/accrued expenses represent those expenses which, although charged to profit and loss account, no cash is paid during the year. For this reason, outstanding/accrued expenses of the current year are added back while calculating cash operating profit.

What is the treatment of underwriting commission in cash flow statement?

If Under Writing Commission is Paid and is Charged in profit and loss account , then it is shown as reduction from Proceeds of Issue of Shares / Security in Financing Activity , and In Operating activity it is added to Net Profit before tax and extra ordinary item.