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LOKESH KUMAR SEN
Accountant, India
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The Preliminary Expenses in Balance Sheet
Where are the preliminary expenses situated in the balance sheet?
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Jaap de Jonge
Editor, Netherlands
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Preliminary Expenses in Accounting Preliminary expenses are those that are incurred before incorporation of a company (i.e., commencement of a business firm).
For example:
- Legal fees (like statuary fees),
- Logo and brand design costs,
- The cost of printing and circulating the memorandum, articles of association, and prospectus,
- Expenses for raising initial share capital,
- The cost of printing of share certificates
These expenses are incurred before the start of the company. Their benefits accrue for many years. They are therefore classified as capital expenditure and shown on the balance sheet under Current Assets (subcategory: other other current Assets). They may be written off over a period of (±5. Years or amortized within the same year (depending on their size and on local laws).
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Hira Aziz
Entrepreneur, Pakistan
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Preliminary Expenses of Founders Preliminary expenses also includes the remenuration of the team that has incorporated the company and took steps for its foundation. Their services are very important for the company therefore they need its acknowledgement and appreciation which could be in the form of shares or salary.
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