Question

In managerial accounting, where do I list the incorporation fees of a new business? On the income statement or the balance sheet? Please explian.

Answer 1

Expenses incurred for the incorporation of new business or company are said to be preli minary expenses. Some of the examples are government fees paid for incorporation of an entity, meeting expenses of promoters, training expenses incurred prior to the incorporation of an entity, project report and feasibility study related expenses etc; As these expenses doesn't result in any physical or tangible assets these are not qualified for asset recognition. These preliminary expenses has to be shown in the balance sheetand written off over a period of 5 years as per companies act. So every year 1/5 th of preliminary expenses charged to income statement as per companies act.