What is profit prior to incorporation how is it calculated?
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It is the profit earned or loss suffered during the period before incorporation. It is a capital profit and is not legally available for distribution as dividend because a company cannot earn a profit before it comes into existence.
Explanation: steps to calculate it:
1. Prepare a trading A/C for the whole period.
2.Calculate time ratio and sales ratio.
3.Prepare a net profit statement to analyse pre and post incorporation periods.
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