Which of the following is a fictitious asset?
Question 1 Report
Which of the following is a fictitious asset?
Answer Details
Preliminary expenses are a fictitious asset.
Preliminary expenses are the expenses incurred by a company at the time of its incorporation, such as legal fees, registration fees, printing charges, and fees paid to underwriters. These expenses are considered as an asset because they have already been incurred by the company, but they cannot be written off as expenses in the same accounting year.
Since preliminary expenses cannot be converted into cash or used to generate revenue, they are considered as a fictitious asset. They are shown on the balance sheet under the head of assets, but they are not tangible assets like cash or inventory.
Therefore, the correct option is preliminary expenses.
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