Question

What are preliminary expenses?Will they be considered fictitious assets or expenses and why so?Is any specific treatment is there for them in ledgers,accounting equation and journal?

Answer 1

Dear Student,

Expenses incurred on the formation of a company are termed as preliminary expenses.
As per AS 26 preliminary expenses are to be written off in the year in which they are incurred, now these are not considered as an asset and it should be given same treatment in accountancy like other expenses.

There is no specific treatment for preliminary expenses in ledgers, journal or accounting equation.

Regards