BU Corporate Accounting Unit 2 PRIOR TO INCORPORATION 2 marks Important Questions with Answers

Corporate Accounting is a special branch of accounting which deals with the accounting for companies , preparation of their final accounts and cash flow statements, analysis and interpretation of companies’s financial results and accounting for specific events like amalgamation, absorption, preparation of consolidated



1. What is profit prior to incorporation?

      perfect propr to incorporation which has incorporated take over a running business as from a certain date which is prior to the date of incorporation. According To the Companies Act, no company can earn a profit before it is incorporated.

2. What is the time ratio?

           Time ration is used for dividing time expenses like rent, salaries, wages, etc. It is calculated by taking into account the pre-incorporation period and the post-incorporation period.

3. What rations normally used to apportion pre and post-incorporation income and expenses?

         To apportion pre and post-incorporation income and expenses ration required are:
Time ratio
sales ratio
Revised time ratio
weighted ratio
purchase ratio

4. How are per incorporation profit treated in books of account?

      A business is purchased by a company on 1st January 1990 and the date of incorporation of the company is !sr April 1990 and the account are closed on 31 Dec every Year. Then the pre-incorporation period is 3 months

5. What is the sales ratio?

          Sales ration which is sed for dividing expenses related to sales, It is Calculated by taking into account the sales of the pre-incorporation period and the sales of the post-incorporation period,

6. How do you treat the loss prior to incorporation in the books od account?

          Pre-Incorporation loss is the capital nature and should be treated as goodwill and debit to a separate account called a goodwill account.

7. Mention any two expenses charged only to the post-incorporation period.

The expenses charges only to post-incorporation period are:
1.Director’s fees
2.Preliminary Expenses
3.Debenture interest
4.Underwriting commission