google.com, pub-6663105814926378, DIRECT, f08c47fec0942fa0 What are Pre-Operating Expenses 4289

Search This Blog

What are Pre-Operating Expenses

The pre - operating expenses , also called up costs, pre - opening or organization, are those made before the start of operations of a company, or prior to the launch of a new initiative of an existing company.

Sometimes it is often thought that these pre-operating expenses are really investments, but this is incorrect, since these incorporation expenses are limited to that period in which the company in question has not yet begun to produce.

It is important to understand the difference between the start of activities and the start of operations of a company. In the case of the start of activities, this is related to the moment in which the company is legally registered as a legal entity.

On the other hand, the start of operations of a company refers to the moment in which it begins to be productive; that is, it begins to sell products or to market the services available to it for such activity.

Pre-operational expenses are considered to be all those that are generated before the start of operations of a company, or of a new initiative promoted by an institution already registered as a legal entity.


For example, the expenses of legal procedures for the incorporation of a company can be considered pre-operational expenses.

Similarly, the preparation of the company's employees and workers in the specific area of ​​the business that will be offered to the market is also considered a pre-operational expense.

On the other hand, pre-operating expenses will not be considered, for example, those expenses in the matter of advertising that are made when the company has already started to produce, when it already has clients and sells its services.

Characteristics of pre-operating expenses
Pre-operating expenses are different from operating expenses or investments. The main characteristics of pre-operating expenses will be detailed below:

1- They are generated before the start of operations
Pre-operational expenses are called that way precisely because they refer to all those that are made before the start of operations of a company.

An expense can also be considered pre-operational when it comes to a company that already exists, but will expand its competencies to other markets, or launch a new product.

Then, pre-operational expenses are considered those related to the administrative procedures to create the legal entity, the expenses that are destined to attract future investors for the project in question, or those that are used in the creation of an advertising campaign, among others. .

2- They are not investments
Pre-operating costs will always be considered expenses. The resources that are available for the activities prior to the beginning of the commercial activity of a company cannot be called investment, because the company does not even exist yet.

Investments are associated with the resources that are dedicated to an activity of a company that is already in operation.

In the case of pre-operating expenses, said company or initiative has not yet been launched, has not provided any service or produced any sale.

No specific assets are generated through pre-operating expenses. All constitution expenses are linked to activities necessary to create the appropriate scenario for the start of operations of a legal entity.

3- They must be necessary expenses
All pre-operating expenses must be strictly necessary expenses. The beginning of a project, the opening of a company or the establishment of a new initiative within an organization will always be a scenario full of challenges.

In this challenging scenario, it will be necessary to use resources in the most efficient and productive way possible, in order to guarantee the success of the initiative in question.

For this reason, it is important that the actual pre-operational expenses required for the initial establishment of a legal entity are clearly defined.

To the extent that these expenses are well defined, they can be executed in the best possible way, and they will fulfill their main function: to cover all those administrative, training and promotional elements, so that a legal entity can start its operations successfully.

4- They are subject to tax deduction
Like all the accounting activity of a company, the pre-operating expenses are also elements subject to the control carried out by the pertinent tax institution.

However, pre-operating expenses can be deducted for tax purposes because they correspond to expenses generated in a period prior to the start of operations of a company.

Laws in some countries establish that pre-operating expenses can be deducted during the first year of the company's exercise, or amortized within a maximum period of 10 years, taking as the starting date the moment in which the company began its commercial activities.

5- They must be classified correctly
Since pre-operating expenses can be deducted, it is convenient to classify them correctly, so that they can be considered pre-operating expenses at the time of an audit.

The laws vary according to each country; however, pre-operating expenses in general are considered deductible because they were economic efforts made before the establishment of a new company, which means that these expenses were not incurred during the period of effective operation of said company.

Examples of pre-operating expenses
According to the classification presented above, the following are considered pre-operating expenses:

- Administrative expenses corresponding to the creation of the legal entity of a company.

- Expenses for requesting permits to be able to sow on a specific land.

- Expenses of office supplies used before the opening of the business.

- Expenses generated by the training of company personnel.

- Expenses for moving the company to a new location.

- Expenses for services of the physical space that is being prepared for the start of operations of the company.

- Expenses for market studies that determine whether or not a specific undertaking is relevant.

- Marketing and promotion expenses of a new product.

- Expenses dedicated to convincing potential investors to participate in a specific project.

Annuities Meaning

Finding Travel Insurance For Cancer Diagnosis

How Does the Stock Market Work

Top 10 Ways to Make Money Online

10 Legit Ways to Make Money and Passive Income Online

10 Ways To Cut Your Health Care Costs

The Ultimate Assurance of Buy-sell Agreements

5 Tips to Prepare for Your Property Settlement

8 Habits of Wealthy and Successful People

Why Millennials Choose to Buy Home

7 Tips Every Homeowner Need to Know About Insurance

8 Tip on Homeownner Insurance

10 Question You Should Ask Mortgage Lenders

How Much is My Car Accident Settlement Worth

200 Business Movement News

150 Financial Tip You Should Know

Essential List of Mortgage Application Document

Prepare Yourself Before Investing in Stock

Shopping is the Right Way Without Debt

Factors Affecting Home Loan Rates

Using Credit Cards With No Debt

Plan for Business Loans

Step Before Buying Insurance

Choosing Life Insurance

How to Get Cheap Car Insurance

If in Debt With a Credit Card

Type of Insurance

How to Request a Claim

Deposit With Banks or Take Out Insurance

Why Do We Need Life Insurance

Insure Assets and Liabilities How is It Different

Contract for Buying a House

Happy if in Debt

Can Not Pay the Car Installments

16 Most Important Car Insurance Terms

Want to Use Urgent Money Where Should I Request a Loan

Save Money in Stocks

How to Have a Home

Plan Before Retirement

Plan for Repayment Carefully

50 Financial Movement You Should Know

How You Can Hit the Heights While Plunging to the Depths

10 Ways to Cut Your Health Care Costs

Tips for Handling an Employee's Departure

How to Get Your Product Onto Retailers' Shelves

A List of Pointers for Low-cost Promotion

A Field Guide to Office Colleagues

How to Get Your Tqm Training on Track

4 Excuses to Use Unconscious Credit Cards

Be Careful Terms of Insurance Agreement

Changing a Home to Pay Off Debt

Want Money to Invest

Credit Card Addiction Symptoms

How to Manage Credit Card Debt if Lose Job

What is Private Fund

Loans for Education

10 Things That Lead to Poverty

Do Not Overlook Insurance

There Are Also Saving on Debt

10 Things You Need to Do Before Retiring

Seed Funds for the Smallest Start-ups

Health Insurance Managed Care Can Cost More

States Go for Bold Changes

Outside Directors: How They Help You

Helping Your Children Plan for a Distant Future

The Tax Advantages of a Home Office

Job Skills Have Declined Firms Say

American Get More for Their Money

Boost Your Problem-solving Power

Finding the Essence of Good Sales People

Suggestions on Selling Your Service Firm

Warming to the Idea of Customer Feedback

It's Timely to Consider Still Another Inequality

More Tax Cuts Coming

Vice Presiddency Becoming More Attractive Goal

Turn Anger Into an Asset

Making the Most of Trade Shows

Ideas for Making the Most of Time on the Road

The Benefits of Smart Inventory Management

Policies That Protect a Company's Good Name

Market-neutral Funds May Offer Solace if Stocks Tank

Bargains in Business Insurance

Bills Would Affect the Hiring of Skilled Foreign Workers

The Ups and Downs of a Postal Rate Proposal

Locking on to Teamwork

Nurturing Part Timers to Be Entrepreneurs

Holding Things Together When Selling A Location

Knowing When Cut The Cord

A New Selling Approach Makes Fashion Sense

Too Much Team Harmony Can Signal Trouble

Oiling The Wheels Of Consumer Satisfaction

Networking 101: Seeing And Being Seen

Nuts About Snack Food

A Jet-Powered Takeoff

Grooming For Success

Switching to Self Insurance

Promoting A World Ethical Standard

Help Wanted Desperately

How to Get a Yes From Your Banker

Lawmakers Have Their Work Cut Out For Them

Making The Climb Onto Store Shelves

Hammering Home Performance Incentives

Have You Seen Your Banker For Your Annual Checkup

Protect Your Company's Proprietary Information

Adding Some Byte To Retirement Plans

From The Ground Up

Pluses And Pitfalls In Voice Mail

Lawmakers Have Their Work Cut Out For Them

Making The Climb Onto Store Shelves

Market Bulls Battle A Case Of Nerves

Check The Fine Print In Picking A 401 (k) Plan

5 Pitfalls Make Your Work Inefficient

Wrong Stock Investing

What is a non life insurance

5 things to do if you want to succeed

5 steps Emphasize the use of credit cards correctly

Unemployment can be saved by doing 5 steps

Obstacles that prevent from saving

Want to be rich do these 3 things

New to the stock market

Change the attitude of saving with 3 steps

Home loan Not difficult anymore

Start investing is not difficult

Come check the finance health

Live 3 items for solving the poor

5 wrong financial views Risking destruction

4 things that should not be overlooked for Save money

Wise financial planning techniques for the family

5 mistakes checklist when buying insurance

5 reduce the risk of doing business

3 risk levels that must be known before investing

Advantages and disadvantages of Requesting a loan

Saving The US Economy

What price loyalty at Vodafone

Alphabet soup and economic recovery

Our growing nostalgia for commuting

Financial alchemy

Personal credit

4 principles of financial success

Buying housing is not a big deal anymore

Essential insurance

How to teach your child to be wise With the use of money

6 Collection techniques That a salary man needs to do

How to choose a credit card that best suits your needs

Beware The Scammers out to empty your bank account

Avoid The Traps Set By Estate Agents

10 Ways To Cut Your Health Care Costs

What is the stock market

Adjust the idea of adding value to your business

How ready are you for down

10 techniques to use money

10 Ideas To Conquer Stocks

10 Year Retirement Plan

Factors That Make Your Finances Worse

Eliminate 5 Weaknesses to Create Success in SME

Retirement Investment Plan Longevity Simpler

5 Secrets to Financial Freedom

How to Invest Without Losing

Do We Need Too Much Money

8 Alarms When Finances Are in Trouble

How to Use Money Saving Techniques

Credit Card Debts Not Difficult Anymore


No comments:

Post a Comment

Popular Posts