FICTITIOUS ASSETS

INTRODUCTION TO ACCOUNTANCY Fictitious assets These are like intangible assets which cannot be seen or touched. Actually these are not assets but some expenditures which cannot be transferred to profit and loss account of a particular period that is why these items are shown on assets side of balance sheet to be written off to P&L account in reasonable years Fictitious Assets are not assets which are tangible and visible like buildings, machinery computer but the expenditure on some activity which is considered as a Capital expenditure instead of Revenue expenditure. When expenditure incurred amount is not debited to Profit and Loss A/C but shown as Fictitious asset and over a period the amount is written off or debited to P and L account. For example Share issue expenses by a Corporate, This is not debited to P& L A/c in the year in which it is incurred but debited in installments as decided by Management over few years. Fictitious assets are the expenses incurred by a Corporate which are not charged to P& L A/c in the same year like Share Issue and Management expenses, These expenses are charged to P and L A/C over a period of 3 to 5 years. As assets cannot be seen physically but the benefit of such expenditure spreads over a period such expenses are known as Fictitious assets. There are certain expenditures/expenses, the benefit of which is not limited to one particular year. Therefore, the whole of these expenses cannot be charged to the profit and loss account at once and hence they are deferred. For e.g. Share Issue Expenses, Discount of Issue of Debentures, etc. Also the debit balance of Profit and Loss Account (loss) is a

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Intro to fictitious assets

Transcript of FICTITIOUS ASSETS

INTRODUCTION TO ACCOUNTANCY Fictitious assets 1048708 These are like intangible assets which cannot be seen or touched Actually these are not

assets but someexpenditures which cannot be transferred to profit and loss account of a particular period that is why these itemsare shown on assets side of balance sheet to be written off to PampL account in reasonable years

1048708 Fictitious Assets are not assets which are tangible and visible like buildings machinery computer but the

expenditure on some activity which is considered as a Capital expenditure instead of Revenue expenditureWhen expenditure incurred amount is not debited to Profit and Loss AC but shown as Fictitious asset and overa period the amount is written off or debited to P and L account For example Share issue expenses by aCorporate This is not debited to Pamp L Ac in the year in which it is incurred but debited in installments asdecided by Management over few years

1048708 Fictitious assets are the expenses incurred by a Corporate which are not charged to Pamp L Ac in the same year

like Share Issue and Management expenses These expenses are charged to P and L AC over a period of 3 to5 years As assets cannot be seen physically but the benefit of such expenditure spreads over a period suchexpenses are known as Fictitious assets

1048708 There are certain expendituresexpenses the benefit of which is not limited to one particular

year Therefore the whole of these expenses cannot be charged to the profit and lossaccount at once and hence they are deferred For eg Share Issue Expenses Discount ofIssue of Debentures etc Also the debit balance of Profit and Loss Account (loss) is aFictitious Asset It is to be cancelled out or adjusted with profit of subsequent years orreserves