What are Preliminary Expenses?

By BYJU'S Exam Prep

Updated on: November 9th, 2023

Preliminary Expenses are the expenses incurred by the promoters of the company at the initial stage and at the time of incorporation of the company before the commencement. A part of such expenditure is debited to the profit and loss account every year and is treated as an asset and includes registration fee, logo and designing cost, legal or professional charges, stamp duty, printing, etc.

Preliminary Expenses

The preliminary expenses are to be completely eliminated in the same year in which expenditure is incurred. They should be written off first from the security premium and the balance, if any, from the profit and loss statement.

Initial expenses are types of expenses or fees before the company is started, and because of this, these expenses are also known as associated costs.

Examples of Preliminary Expenses

Some examples of initial or preliminary expenses are-

  • The legal amount paid before the incorporation of the company.
  • Expenses attributed to a feasibility study or marketing survey.
  • Marketing-related costs such as logo design and branding.
  • Fees are paid for consulting and professional services during incorporation.

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