Is P&L account needed before operations commence?
WE ARE a construction company incorporated recently. We don’t expect to get any orders for the next two years at least. Meanwhile, we have been incurring routine expenses on salary, and so on, and also earned some interest from bank. Are we obliged to prepare a profit and loss account pending commencement of activities? Can we carry forward these expenses for write off in future? MB, email The Institute of Chartered Accountants of India has a lot to say on expenditure incurred during construction period. I doubt though whether the views of the ICAI would be directly relevant to you inasmuch as yours is not a case of expenditure during the construction period. Nevertheless, the views can be tailored to your case mutatis mutandis. The Institute agrees that publishing a profit and loss account when admittedly there is no revenue producing activity could be misleading. It has, therefore, advised, as an alternative in such cases, preparation of balance-sheet to which a schedule of expenses
