Accountancy Forum

In the beginning of a business, is it better to put all the initial costs to Assets and depreciate, OR to show a huge loss.

I have started a partnership business, with one of my friend. I will be the working partner and will be paid working @ 15% of net profit and profit margins are ME 25%, FRIEND 75%.

I am having huge loss in the first month due to which I will not get any working amount neither profit this month as well as next month, because losses will be covered in next month.

What should I do to make it beneficial for me

1. Should I put initial expenses into Capital of ME?

2. Should I put initial expenses into Capital of FRIEND?

3. Should I expense out these initial expenses and bear 2 months loss zero earnings neither working?

What should I do to make it beneficial for ME as well as my partner FRIEND, please suggest.

Shutdown ur business [P]

Salam,

It is always recommended to depriciate all ur assets over their useful lifr & only show that year's depreciation in the P&L a/c.

The new machines bought should not be charged to P&L a/c.

Hope this helps.

[8D]

Osama, I am not talking about plant and machinery.... I am talking about preliminary expenses like i have done paint job in the factory, machine's repair & maintenance, wiring, office furniture, lights fans etc... what should i do with these expenses... should i put them into Assets OR should i put them into revenue expenses?

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Mujahid</i>
<br />Shutdown ur business [P]
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

thanks mujahid but i have started business to earn from it not for fun to open a business and then next month close it ).

Dear.

All those expenses having economic life of one or more years shall be treated as Asset and there is no need to expense out this. Moreover, calculate the profit and loss of the business after 4 or five months, so that you can easily analyze it.

regards

Salam,

All the expenses incurred to bring the machines in useable form are to be capitalised.

The preliminary expenses u have mentioned should be capitalised as well.

Hope this helps...

[)]