[D] Income statement audit. 2.Preliminary expenses. … Forms of income statement are – Therefore, they are accounted as fictitious assets. Examples of Fictitious Assets 1.Promotional expenses of a business. Preoperative expenses are those expenses incurred by a company before commencement of commercial operations; or before starting to earn income. Examples are so usefull. Preliminary expenses are an example of _____ These expenses are written off over a period of 3-4 years and till they are written off, they are depicted in the balance sheet as non-current assets. Intangible assets and intellectual assets do not have physical existence. Examples of fictitious assets are deferred revenue expenditure, preliminary expenses… We cannot touch them but we can only feel. Ans : d 36. Some Examples of fictitious assets are Discount which is given by the company when it issue shares, Preliminary expenses etc…. What is a fictitious asset? Periodical audit is also called as _____. Fictitious assets are those assets which are not real but whose benefits are derived by the company over a long period of time. Preliminary expenses could also be charged against capital reserve out of profit prior to incorporation. These expenses are written off over a period of 3-4 years and till they are written off, they are depicted in the balance sheet as non-current assets. Fictitious assets: Its not the actual assets , its the expenditure occurred at the tine of commencement of firm ( capital expenditure )like preliminary expenses, discount on issue on debenture/shares, underwriting commission etc. In the assets side of company s balance sheet, fictitious asset like discount on issue of debentures are shown under the heading _____ a) Fixed assets b) Investments c) Current assets d ) Miscellaneous expenditure 46. How ever Accounting standard 26 says a period 10 years for writing off intangible asset. Expenses incurred on the formation of a company or the Preliminary Expenses are treated as capital expenses because their benefit will be available over a long period. great job and keep it up, you’ve made my work and learning process easy. 1,00,000 on condition that all profits earned from 1.1.2009 shall belong to the company. Preliminary expenses is an example of- This objective type question with answer for competitive exams is provided by Gkseries. [B] Interim audit. Fictitious assets are those assets which are not tangible in nature & has no value. These are the formation expenses of the company before any operation of the busines held. In such cases the benefit may or may not be derived from the deferred revenue expense. Answer: Option [C] 22. They are a good example of fictitious assets which are written off every year from the profits earned by the business. [A] fictitious asset. The auditor of a government company shall be appointed by _____. Now it becomes important to think that how to treat these expenses that is what must be the treatment of preliminary expenses. These are the formation expenses of the company before any operation of the busies held. They are recorded as assets in financial statements only to be written off later. Fictitious assets are not real assets. Preliminary assets can be found on assets side of balance sheet. Examples: Deferred Cost such as Preliminary Expenses, Loss on issue of shares Discount on issue of shares, Loss on issue of debentures and Discount on issue of debentures. Preliminary expenses are related to creating new company and before starting business operations. The preliminary expenses are amortized or written off in five years for the purpose of Income Tax in India. Accounting related to Preliminary Expenses. Preko Isaac Boateng Link. These are the expenses of the company incurred before the incorporation of the company. These are transferred to the profit and loss accounts and written off every year from the profits of the business. [B] intangible asset. 3.Discount allowed on issue of shares. They are not taken over in the process of M & A. Answer: Option [A] 21. [C] Balance sheet audit. The most common example is situation when the company begins its operation and expenses related to that start cannot be placed under normal account headings. Quote three examples. Preliminary expeneses are the nature of fictitious assets. One asset classification is fictitious assets. Raj Agarwal Link. We use fictitious assets are to keep track of assets that cannot be recorded under normal accounting categories, such as prepaid expenses, refundable deposits or deferred interest. you can also transfer whole amount in single year but for income tax purpose 1/5 of the amount will consider. Fictitious asset is used to account for expenses that are no related to real, tangible assets. Illustration 2: Moon Ltd., which was incorporated on 1st June 2009, took over the business of N, a proprietary concern, from 1st January 2009, for Rs. Preliminary expenses are the nature of fictitious assets. Comments on this entry are closed. They are loss assets. This Video Give the Basic Concept of Preliminary Expenses And Primary Expenses ? Promotional expenses, Preliminary expenses, Discount allowed on issue of shares and Loss incurred on issue of debentures are examples of fictitious assets. Basically, they are amortized over a period of time. Some Other Types of Assets. These expenses are treated as fictitious because these are not actual assets. 45. 35. Legal expenses incurred in purchasing land, property represent: a) Capital expenditure b) Revenue expenditure c) Revenue loss d) Deferred revenue expenditure 109. [C] wasting asset. other than current assets. Q.3. Therefore, the whole of these expenses cannot be charged to the profit and loss account of the year, in which the amount is incurred. Preliminary expenses cannot be put on normal accounts, but they have to be accounted. preliminary expense is a fiticious asset....benefit was derived from it in the past...now it has no economic value....but profit in the past was not sufficient to write it off so it is carried forward. Urdu / Hindi My Recommenmd Amazing Gears & Products: 1. [D] floating asset. In such cases the benefit may or may not be derived from the deferred revenue expense. Fictitious assets are written off against the firm's earnings more than one accounting period. Fictitious assets are such assets whose benefit is derived over a longer period of time, Like Deferred revenue expenditure, Misc. They are like preliminary expenses, P& L … They are recorded as assets in financial statements only to be written off later. Good Job !! Fictitious Assets. Is This Answer Correct ? Good. Fictitious assets are expenditures/expenses whose benefit is not limited to one particular year. Normally preliminary expense are treated as intangible asset and shown on the asset side of the balance sheet under the head Miscellaneous asset. Accounting for preliminary Expenses: The benefit of the preliminary expenses is long-term so it is treated as intangible asset and shown in Balance sheet under Missilinous assets. Fictitious Assets are not assets in the real sense.It is the benefit of an expense to be enjoyed by the organisation over the future period of time.Eg:- Preliminary expenses,Advertising Campaign expenses,Discount on issue of shares and so on. These expenses will be written off in 5 equal year installment in profit and loss A/c. preliminary expenses are a- current assets b-fixed assets c-fictitious assets d-none of these - Fundamentals of Accounting - Accounting as a Measurement Discipline- … Contingent Assets Those assets which come into existence upon the happening of a certain event … These expenses are shown on the assets of the balance sheet under the head 9 Yes : 15 No : Post New Answer View All Answers. These expenses are treated as fictitious because these are not actual assets. sumithra Link. Basically, they are amortized over a period of time. Goodwill is not considered as fictitious assets because goodwill have some value which enables the firm to earn extra profit but fictitious assets cannot be realised in money worth and such assets e.g preliminary expenses and it considers intangible because it acquire the principle of this asset Fictitious assets are written off against the firm's earnings more than one accounting period. Such assets are written off as soon as possible, when the company earns first earnings. Ans. The fictitious assets are written off after the company obtains first earnings. Nikhil Link. They are shown on the assets side as they show debit balance. [A] Final audit. These are transferred to the profit and loss accounts and written off every year from the profits of the business. In most of the cases these preliminary expenses are treated as intangible asset and shown on the asset side of the balance sheet under head miscellaneous asset. Other Non-Current Assets: Patent Rights, Trade Marks, Goodwill, Preliminary Expenses, and Discount on issue of Shares or Debenture, P & L A/c (Dr. Balance), i.e. Fictitious assets consists – a) preliminary expenses, b) training & development expenditures, c) debit balance of P & L account, d) all of these. What is the fictitious assets? expenses, Preliminary expenses, Accumulated loss,etc. Companies can have multiple asset types that help them run operations. _____ is an example for fictitious asset a) Machinery b) Patent c) Stock d) Preliminary expense These expenses are shown . Preliminary expenses are of the nature of fictitious assets. Meaning of Fictitious Assets: – The Fictitious word, itself says “fake”.So Fictitious Assets are not an asset in the true sense but this is a huge amount of expenses or losses which are unclaimed in profit/loss account during the year in which they are incurred.. 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