preliminary expenses

how can the preliminary expense be treated as an asset? it is usually seen in the asset side of the balance sheet.

2 Answer(s)


Preliminary expenses are the expenses that are spent by the promoters before the incorporation of company.
Expenses paid for CA for incorporation of company
Expenses paid for name approval of the company
Expenses for printing of statutory documents like MOA, AOA
Stamp duties paid.. so on and so forth..

Since the benefit of the preliminary expenses is long-term, it is treated as intangible asset and shown in Balance sheet under Miscellaneous assets. These expenses will be written off in 5 equal year installment in profit and loss A/c


Preliminary expeneses are the expenses incurred before the commencement of the business and same will be deferred over the period will be shown under Assets side of balance sheet as Miscellaneous Expenses (Asset)