Hello, I registered a section 8 non profit last year. But there are some expenses that I have been managing personally - website, stipend for interns. These are from a year before formal Incorporation and continued till 3 months after Incorporation.
How do I account for these expenses in the organization books?
Pre incorporation expenses are preliminary expenses and can be reimbursed to promoters from Income & Expenditure account or writing off capital reserves as maybe possible in year of incorporation. Such expenses should be restricted to legal fees, ROC fees etc related to incorporation. The Income Tax Act however mandates different treatment i.e. amortisation of prelim exp over 5 years with condition that annual charge cannot be more than 5% of costs or capital employed and additional reporting requirements. It would be better to charge these expenses to I&E or capital reserve in year of incorporation since they are not in the nature of intangible assets. Expenses post incorporation can be charged to I&E directly.
CS Sharad Bhargava