Loss prior to incorporation

Loss prior to incorporation being of capital nature shall be debited to separate account called “Loss Prior to Incorporation Account” and shown under Miscellaneous expenditure on the assets side of Balance sheet to the extent not written off.

Loss prior to incorporation can be dealt with in any of the following manner:

1.   Write off against capital profits of the company

2.   Treated as Goodwill and debited to Goodwill account

Such loss can be treated as Deferred Revenue Expenditure and written off out of profits of the company over a period of years