Question

For computing pre-incorporation profits,
discount on debentures written off is
V
a. treated as post-incorporation
expenditure
b allocated in sales ratio
c treated as pre-incorporation
expenditure
d. allocated in time ratio​

Answer 1

Answer:

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Answer 2

Option (a). For computing pre-incorporation profits, a discount on debentures written off is treated as a post-incorporation expenditure.

Features of pre and post-incorporation of business:

• When purchasing company purchases business from a vendor company, so many times there comes a difference between the purchasing of business and incorporation of the business.
• Because of those differences, we need to proportionate the whole income and expenditure based on pre and post-incorporation of business.
• Discount on debentures is related to companies so this expenditure will come in the post-incorporation period because the issue of shares and debentures are only done by the companies.