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WAEC Financial Accounting 1991 (August) Question 2

Question 2

Company Accounts

Preliminary expenses of a limited liability company are

  1. A.fixed assets
  2. B.current assets
  3. C.fictitious assets
  4. D.fictitious liabilities
  5. E.current liabilities.
Show the answer and explanation

Answer: C (fictitious assets)

Explanation

Preliminary (formation) expenses have no resale value; they are a fictitious asset to be written off.