Under current accounting standards preliminary expenses of forming a company must be treated as a(n):

Question

Quizplus · Accepted Answer

Preliminary expenses are considered as one-time expenses incurred for the formation of the company and are not related to any ongoing operation. As per accounting standards, such expenses are treated as expenses and are charged to the income statement in the period in which they are incurred. Therefore, option B is the correct choice. Option A, C and D are incorrect as preliminary expenses are not recognized as assets, they are not deducted from the proceeds of the share issue, and they cannot be considered as a liability.

Under Current Accounting Standards Preliminary Expenses of Forming a Company