Question

What are preliminary expenses?

Answer 1

Preliminary expenses are incurred before the incorporation, initial stage, and commencement of the business.

Explanation

The expenses incidental to the formation of a company also regarded as a preliminary expense. These are considered deferred revenue expenditure. A part of these expenses is debited every year to the profit and loss account. Preliminary expenses are shown on the assets side of the balance sheet under the heading other assets.

Examples of the preliminary expenses

• Company incorporation expenses
• Logo expenses
• Amount paid for stamp duties
• Consultation charges for initiating a company