Fictitious Assets. View Answer . 2. Those assets on which the business will get benefits for a long period of time i.e. Contingent Assets The examples of Fictitious assets are loss on debentures issue, preliminary expenses, discount on shares, promotional expenses, etc. These are the formation expenses of the company before any operation of the busines held. 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. We will now discuss the verification and valuation of the following fictitious assets − Preliminary Expenses. But due to some unavoidable circumstances, these losses or expenses couldn’t be written off during the year. 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. 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. Fictitious Assets. Meaning. : 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. The assets which have no market value are called fictitious assets. They are a good example of fictitious assets which are written off every year from the profits earned by the business. Such assets are written off as soon as possible, when the company earns first earnings. Basis of Difference: Fixed Assets. This website uses cookies to ensure you get the best experience on our website. Goodwill represents the amount paid by the purchaser for the reputation and connections of … Preliminary expenses are incurred at the time of formation and commencement of company. Learn more ... C fictitious assets. Preliminary expenses are the nature of fictitious assets. They consider other items like preliminary Expenses, debts balance of profit and loss account, etc. Examples of fictitious assets are deferred revenue expenditure, preliminary expenses… 2. Gross profit ratio indicates the difference between sales and direct costs. Some Other Types of Assets. These are not assets but losses or expenses. That means fictitious assets are fake assets. These expenses are shown . Preliminary expenses are related to creating new company and before starting business operations. These expenses are shown on the assets of the balance sheet under the head These are transferred to the profit and loss accounts and written off every year from the profits of the business. Gross Profit Ratio: This ratio is also known as Gross margin or trading margin ratio. D current liabilities. Fictitious Assets. These expenses are of capital nature and include stamp … These are transferred to the profit and loss accounts and written off every year from the profits of the business. Therefore, they are accounted as fictitious assets. Preliminary expeneses are the nature of fictitious assets. 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 are the formation expenses of the company before any operation of the busies held. Preliminary expenses is an example of- This objective type question with answer for competitive exams is provided by Gkseries. Meaning. as fictitious assets for the reason that they do not represent any value at all to the business. Fictitious assets are those assets which are not real but whose benefits are derived by the company over a long period of time. Basis of Difference: Current Assets. That’s why they’re called fictitious assets. 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