What is profit prior to incorporated?

Question

Answer

'Profit prior to incorporation' is the profit earned or loss suffered during the period before incorporation. It is a capital profit and is not legally available for distribution as dividend because a company cannot earn a profit before it comes into existence.

Answer

The profit which is earned before the incorporation/registration of the company is called profit prior to incorporation. A businessman cannot wait to earn till the registration/incorporation and hence he started business transaction and earn profit before the existence of the company, and this profit is called as profit prior to incorporation. This is not recorded legally hence it is not shown and not distributed legally.

Answer

It is profit  earned during the period before the incorporation of the company.It is a capital profit.It cannot be distributed as dividend to the shareholders because a company cannot earn profit before incorporation as per law.

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Thus any profit/loss made before the incorporation is known as profit perior to incorporation 'Which is treated as a capital profit and the same cannot be distributed as business profit . hence, it cannot be distributed by way of dividend.

Answer

Profit made by promoter before incorporation of business

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