Acquisition of Business and Profit Prior to Incorporation

Profit prior to incorporation belongs to:

• Shareholders

• Company

• Creditors

Profit prior, to incorporation should be credited to:

• Capital Reserve

• Revenue Reserve

• Goodwill

Loss prior to incorporation should be debited to:

• Capital Reserve

• Revenue Reserve

• Goodwill

Gross Profit is to be apportioned between Pre and Post incorporation periods in

• Time Ratio

• Sales Ratio

• Cost Ratio

Bad debts recovered which was written off before purchase of business should be:

• Credited to Profit

• Debited to Profit

• Ignored

Audit fees should be divided between Pre and Post incorporation periods in:

• Time Ratio

• Equal Ratio

• Sales Ratio

Salary paid to Manager, for a period before acquisition of business, should be:

• Debited to Pre-incorporation

• Debited to Post-incorporation

• Ignored

Interest paid to Vendor should be divided between Pre and Post incorporation periods in:

• Time Ratio

• Equal Ratio

• Sales Ratio

Discount received from creditors and carriage inwards should be divided between Pre and post incorporation periods in:

• Time Ratio

• Purchase Ratio

• Sales Ratio

Pre-incorporation Loss may be treated as goodwill and debited to goodwill account.

• True

• False