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Preliminary expenses of ₹ 35,000 are shown in the balance sheet under which of the following the head?
- a)Non-current assets
- b)Current assets
- c)Non-current liabilities
- d)Deducted from securities premium reserve
Correct answer is option 'D'. Can you explain this answer?
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Preliminary expenses of 35,000 are shown in the balance sheet under w...
The correct answer is option 'D', i.e., deducted from securities premium reserve.
Explanation:
Preliminary expenses are the expenses incurred by a company before its incorporation. These expenses include legal charges, registration fees, printing costs, and other expenses incurred during the formation of the company. Since these expenses are incurred before the company starts its operations, they cannot be considered as revenue expenses. Instead, they are treated as capital expenses and are shown as an asset in the balance sheet.
The Securities Premium Reserve is a reserve created out of the premium received on the issue of shares. This reserve is created to be used for specific purposes such as the issue of bonus shares or the writing off of the preliminary expenses. Since preliminary expenses are a capital expenditure, they can be written off against the securities premium reserve. Thus, the amount of preliminary expenses is deducted from the securities premium reserve and shown as a deduction in the balance sheet.
Hence, the correct answer is option 'D', i.e., deducted from securities premium reserve.
Explanation:
Preliminary expenses are the expenses incurred by a company before its incorporation. These expenses include legal charges, registration fees, printing costs, and other expenses incurred during the formation of the company. Since these expenses are incurred before the company starts its operations, they cannot be considered as revenue expenses. Instead, they are treated as capital expenses and are shown as an asset in the balance sheet.
The Securities Premium Reserve is a reserve created out of the premium received on the issue of shares. This reserve is created to be used for specific purposes such as the issue of bonus shares or the writing off of the preliminary expenses. Since preliminary expenses are a capital expenditure, they can be written off against the securities premium reserve. Thus, the amount of preliminary expenses is deducted from the securities premium reserve and shown as a deduction in the balance sheet.
Hence, the correct answer is option 'D', i.e., deducted from securities premium reserve.
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Preliminary expenses of 35,000 are shown in the balance sheet under which of the following the head?a)Non-current assetsb)Current assetsc)Non-current liabilitiesd)Deducted from securities premium reserveCorrect answer is option 'D'. Can you explain this answer?
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