what is fictitious assets

what is fictitious assets

1 year ago 118
Nature

Fictitious assets are assets that do not have a physical existence or realizable value, but are represented as actual cash expenditure in the financial statements. They are expenses incurred in running a business, but companies categorize them as assets in the balance sheet. The principle behind this concept is that, like assets, these expenses will give back returns to the organization over an extended period. Fictitious assets have the following characteristics:

  • They have no physical existence.
  • They have no realizable value.
  • They are amortized in one or more profitable financial years.

Examples of fictitious assets include promotional marketing expenses, underwriting commission, preliminary expenses, discount allowed on shares, and loss incurred on the issue of debentures.

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