Pre-operative Expenes

[CASUNIL BHANSALI]

I have create a company and after incorporation, i incur some pre operative expense and other income like Interest on FDR  so i prepare P&L Account to claim these pre-op expense. Now the business of the company has not been started. in next years company has not any income so we are showing expenses as pre-operative expenses. is it ok to show pre-op exp. after preparing P&L account. please tell me proper treatment for the same.

[CAGOPALJI AGRAWAL]

Sunil Ji

After application of AS-26 on Intangible Assets, the concept of pre-operative, deferred revenue etc do not exist. The preliminary and pre-operative expenses have to be debited in the Profit & Loss account itself. .For detail, please read para 56 of the said standard. AS 26 is applicable for all entities invariably w.e.f. 01/04/2004.

AI Summary

Accounting standard AS-26 requires pre-operative and preliminary expenses be charged to the profit and loss account. Under the Accounting Standard on Intangible Assets the concepts of pre-operative, preliminary and deferred revenue expenses are not recognised as separable deferred assets; preliminary and pre-operative expenditures must be debited in the Profit & Loss account, as explained in the standard's specified paragraph, and the standard applies to all entities from the implementation date.