Preliminary expenses:
Preliminary expenses refer to the costs incurred by a company before its incorporation or during the early stages of its operations. These expenses are considered as an investment in the establishment of the company and are not directly related to the generation of revenue.
Preliminary expenses can be categorized into different types based on their nature and treatment in the financial statements. The options provided in the question are:
A: Revenue receipt:
- Revenue receipts are the income received by a company from its regular business activities.
- Preliminary expenses do not fall under the category of revenue receipts as they are not generated from the normal business operations.
- Therefore, option A is incorrect.
B: Deferred revenue receipt:
- Deferred revenue receipts are the income received in advance for goods or services that will be provided in the future.
- Preliminary expenses are not deferred revenue receipts as they are not related to the future provision of goods or services.
- Therefore, option B is incorrect.
C: Fictitious asset:
- Fictitious assets are those assets that do not have a physical existence but are represented by intangible rights or benefits.
- Preliminary expenses are considered as fictitious assets as they represent the expenditure incurred in the initial stages of the company's formation.
- These expenses are written off over a period of time and are not considered as tangible assets.
- Therefore, option C is correct.
D: Deferred capital receipt:
- Deferred capital receipts are the funds received by a company in advance for the issuance of shares or debentures.
- Preliminary expenses are not deferred capital receipts as they are not directly associated with the capital raised by the company.
- Therefore, option D is incorrect.
In conclusion, the correct answer is option C: Fictitious asset. Preliminary expenses are treated as fictitious assets in the financial statements of a company.