Companies not only in the production and operation activities will generate costs, in the formal opening before the corresponding costs will be incurred, pre-opening costs are generally attributed to the category of start-up costs, for the expenses, how to do the accounting treatment?

Accounting entries for pre-opening costs

Borrow: administrative expenses - start-up costs

Goods: bank deposits

Or

Borrow: long-term amortized expenses - start-up costs

Loan: bank deposits

What is administrative expenses?

Management costs are the various costs incurred by the enterprise administration for the organization and management of production and business activities. Including specific items are: the board of directors and administrative departments in the enterprise management, or should be borne by the enterprise unified company funds, labor union funds, unemployment insurance premiums, labor insurance premiums, board of directors fees, hiring intermediaries, consulting fees, litigation costs, business hospitality, office expenses, travel expenses, postage and electricity, green fees, management salaries and welfare costs, and so on.

What does long-term amortized expenses mean?

Long-term amortized expenses are expenses that have been expended by the enterprise but the amortization period is more than one year (excluding one year), including start-up expenses, improvement expenses of leased fixed assets and major repair expenses of fixed assets with amortization period of more than one year, and stock issuance expenses.

Characteristics of long-term amortized expenses:

(a) long-term amortized expenses need to be amortized evenly over the period of benefit;

(b) long-term amortized expenses have no value and cannot be transferred;

(c) long-term amortized expenses have the nature of pooled expenses.

What does start-up costs mean?

Start-up expenses are expenses incurred by an enterprise during the preparatory period, including personnel salaries, office expenses, business hospitality expenses, training expenses, travel expenses, printing expenses, registration fees, and expenses such as exchange gains and losses and interest that are not included in the cost of fixed assets and intangible assets.

Fixed assets do not belong to the start-up costs, business hospitality can be included in the start-up costs during the preparation period of the enterprise, and the business hospitality costs incurred after the normal operation of the business should be included in the administrative expenses - business hospitality expenses

In addition to the purchase and construction of fixed assets, acquisition of inventory and other capital expenditures incurred, all costs incurred, including the rent, should be included in the "Long-term amortized expenses - start-up costs" account, to be recognized in profit or loss from the month in which the enterprise began production and operation.