Fictitious Assets. These are the formation expenses of the company before any operation of the busies held. Fictitious Assets. D current liabilities. These are the formation expenses of the company before any operation of the busines held. Goodwill represents the amount paid by the purchaser for the reputation and connections of … Basis of Difference: Current Assets. Preliminary expenses are the nature of fictitious assets. Formula: The term fictitious assets refer to preliminary expenses, debit balance of Profit and Loss Account and other similar losses shown on Balance Sheet asset side. Those assets which are used or utilized within the period of one year are known as Current Asset. These are transferred to the profit and loss accounts and written off every year from the profits of the business. Examples of fictitious assets are deferred revenue expenditure, preliminary expenses… This website uses cookies to ensure you get the best experience on our website. Learn more ... C fictitious assets. Gross profit ratio indicates the difference between sales and direct costs. Preliminary expenses are related to creating new company and before starting business operations. But due to some unavoidable circumstances, these losses or expenses couldn’t be written off during the year. We will now discuss the verification and valuation of the following fictitious assets − Preliminary Expenses. These are transferred to the profit and loss accounts and written off every year from the profits of the business. Expenses incurred on the formation of a company or the Preliminary Expenses are treated as capital expenses because their benefit will be available over a long period. These expenses are shown on the assets of the balance sheet under the head Basis of Difference: Fixed Assets. Preliminary expenses cannot be put on normal accounts, but they have to be accounted. Asset Valuation Understanding the net worth of an investment after a few years or calculation of intangible assets owned by organizations like trademarks or patents is called valuation of assets. 2. That’s why they’re called fictitious assets. Meaning. Preliminary expenses are incurred at the time of formation and commencement of company. 2. Such assets are written off as soon as possible, when the company earns first earnings. Fictitious Assets. They are a good example of fictitious assets which are written off every year from the profits earned by the business. Contingent Assets Fictitious assets are those assets which are not real but whose benefits are derived by the company over a long period of time. Gross Profit Ratio: This ratio is also known as Gross margin or trading margin ratio. : The Fictitious word, itself says “fake”.So Fictitious Assets are not an asset in the true sense but this is a huge amount of expenses or losses which are unclaimed in profit/loss account during the year in which they are incurred. These expenses are shown . The examples of Fictitious assets are loss on debentures issue, preliminary expenses, discount on shares, promotional expenses, etc. The assets which have no market value are called fictitious assets. These expenses are of capital nature and include stamp … That means fictitious assets are fake assets. Meaning. They consider other items like preliminary Expenses, debts balance of profit and loss account, etc. Those assets on which the business will get benefits for a long period of time i.e. Preliminary expenses is an example of- This objective type question with answer for competitive exams is provided by Gkseries. as fictitious assets for the reason that they do not represent any value at all to the business. Therefore, they are accounted as fictitious assets. Examples: Deferred Cost such as Preliminary Expenses, Loss on issue of shares Discount on issue of shares, Loss on issue of debentures and Discount on issue of debentures. These are not assets but losses or expenses. Preliminary expeneses are the nature of fictitious assets. Some Other Types of Assets. View Answer . , but they have to be accounted when the company earns first earnings earns first earnings ’. Ratio: This ratio is also known as Current Asset not be put normal. 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