what is fictitious assets

manpreet Best Answer 3 years ago

what is fictitious assets ?

manpreet 3 years ago

Asset created by an accounting entry (and included under assets in the balance sheet) that has no tangible existence or realizable value but represents actual cash expenditure. The purpose of creating a fictitious asset is to account for expenses (such as those incurred in starting a business) that cannot be placed under any normal account heading. Fictitious assets are written off as soon as possible against the firm's earnings.

manpreet 3 years ago

Fictitious Assets

The best way to understand fictitious assets is to memorize the meaning of the word “fictitious” which means “not true” or “fake”.

Fictitious assets are not assets at all, however, they are shown as assets in the financial statements only for the time being. In fact, they are expenses & losses which for some reason couldn’t be written off during the accounting period of their incidence.

They are written off against the firm’s earnings in more than one accounting period. Basically, they are amortized over a period of time. They are recorded as assets in financial statements only to be written off in a future period.

Examples of Fictitious Assets:-

• Promotional expenses of a business
• Preliminary expenses
• Discount allowed on issue of shares
• Loss incurred on issue of debentures