08-29-2007, 07:36 PM
Dear Kamran Sahib,
With reference to the above discussion, what would be the treatment of the pre incorporation expenses in respect of a private limited company which has not yet started any trade. The company has acquired some assets but for the financial year ended it had no trading activity nor had any other source of income.
As per my understanding the profit and loss account would be drawn once the trading is started. In absence of any stream of income, would it be appropriate to charge such expenses to Profit & Loss account? If yes, would it not be in contravention of matching principal? And if no, do we have the option to categorize such expenses as deferred cost and amortize once the revenue stream is operational?
Looking forward for your professional guidance.
Regards,
With reference to the above discussion, what would be the treatment of the pre incorporation expenses in respect of a private limited company which has not yet started any trade. The company has acquired some assets but for the financial year ended it had no trading activity nor had any other source of income.
As per my understanding the profit and loss account would be drawn once the trading is started. In absence of any stream of income, would it be appropriate to charge such expenses to Profit & Loss account? If yes, would it not be in contravention of matching principal? And if no, do we have the option to categorize such expenses as deferred cost and amortize once the revenue stream is operational?
Looking forward for your professional guidance.
Regards,
