how is profit perior to incorporation treated in accounts ?
Answer (1)
14th Mar, 2021
Hello aspirant,
any profit/loss made before the incorporation is known as “Profit (Loss) Prior to Incorporation” which is treated as a capital profit and the same cannot be distributed as business profit. ... The same is to be transferred to Capital Reserve or may be adjusted against Goodwill.
Profit prior to incorporation is the profit earned or loss suffered during the period before incorporation. It is a capital profit and not legally available for distribution as dividend because a company cannot earn a profit before it comes into existence.
Thankyou
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