Start-up costs refer to the expenses incurred during the period from the date of approval of the establishment of the enterprise to the date of the commencement of production and operation (including trial production and trial operation) (i.e., during the preparation period). Including the preparatory period personnel wages, office expenses, training costs, travel expenses, printing costs, registration fees, as well as not included in the acquisition and construction of fixed assets and intangible assets cost of exchange gains and losses and interest expenses.
The preparatory period refers to the period from the date the enterprise is approved for preparatory work to the date of commencement of production and operation (including trial production and trial operation).
Scope of start-up costs
(a) the specific content of the start-up costs
1, the expenses of the preparatory staff
(1) the labor costs of the preparatory staff: specifically including the preparatory staff of the wages and bonuses and other wage expenses, as well as social insurance should be paid. During the preparatory period, such as medical expenses and other welfare costs, if the preparatory period is relatively short can actually be expensed, the preparatory period is longer, can be based on 14% of the total wage bill to be resolved by the accrual of employee welfare costs.
(2) travel expenses: including in-town transportation and out-of-town travel.
(3) board of directors' fees and joint committee fees
2, the cost of business registration and notarization: mainly including registration fees, capital verification fees, tax registration fees, notarization fees and so on.
3, the cost of raising capital: mainly refers to the handling fees paid for fund-raising, as well as exchange gains and losses not included in fixed assets and intangible assets and interest, etc..
4, personnel training costs: mainly the following two cases
(1) the introduction of equipment and technology needs to be digested and absorbed, selected some workers in the preparatory period to go out for further training and learning costs.
(2) the hiring of experts for technical guidance and training of labor and related costs.
5, amortization, scrapping and destruction of business assets
6, other costs
(1) office expenses, advertising costs, socializing and entertainment costs incurred during the preparatory period.
(2) Stamp duty
(3) Feasibility study expenses confirmed by the investor to be borne by the company
(4) Other expenses related to the preparation of the construction, such as information research, litigation costs, printing costs, communication costs, and celebration gift costs and other expenses.
(2) Expenses not included in the scope of start-up costs
1, expenses incurred in the acquisition of various assets. Including the purchase and construction of fixed assets and intangible assets is to pay for the transportation costs, installation costs, insurance costs and related labor costs incurred in the purchase and construction.
2, the provision should be borne by the investing parties. Such as the investment parties for the preparation of the establishment of the enterprise has carried out investigations, negotiation of travel expenses, consulting fees, hospitality and other expenditures incurred. Our government also stipulates that, when the Sino-foreign joint venture negotiations, foreign businessmen are required to negotiate business hospitality expenses incurred shall not be listed as start-up costs of the enterprise, and shall be borne by the enterprise that made the invitation.
3, fixed assets, intangible assets and other expenditures for the training of employees shall not be included as start-up costs.
4, the interest paid by the investor for the capital invested to raise its own money is included in the start-up costs and shall be borne by the investor itself.
5, cash deposited in foreign currency to the bank to pay the handling fee, the cost shall be borne by the investor.
(C) the determination of the preparatory period
The determination of the preparatory period of the enterprise in our country is greatly influenced by the tax law. For example, the Implementation Rules of the Foreign Income Tax Law, "foreign-funded enterprises in the preparatory period for the enterprise was approved for the preparatory period until the date of the start of production, operation (including trial production). The "date of approval for preparatory work" referred to above specifically refers to the date when the investment agreement and contract signed by the enterprise are approved by the government of China. The "date of commencement of production and operation (including trial production)" refers to the end of the preparatory period from the date on which the enterprise's equipment starts to operate, and the enterprise starts to supply materials to manufacture products or sell the same first commodity. Other enterprises may refer to this provision.
(d) start-up costs are generally amortized over five years, the new enterprise accounting system provides for start-up costs amortized
Start-up costs of the accounting treatment
"Enterprise Accounting System" (Caixiang [2000] No. 25) on the amortization of start-up costs for the period of a major adjustment. The original industry accounting system provides that the start-up costs incurred by the enterprise should be amortized in equal installments over a period not exceeding five years from the month of production and operation. Article 50 of the Accounting System for Enterprises stipulates that: "Except for the purchase and construction of fixed assets, all expenses incurred during the preparatory period shall first be summarized in long-term amortized expenses, and shall be charged to profit or loss in the month of commencement of production and operation at one time from the month in which the enterprise commences production and operation. If the enterprise's long-term amortized expense item cannot benefit the subsequent accounting period, the amortized value of the item not yet amortized shall be fully transferred to the profit and loss of the current period." It can be seen that the accounting treatment of start-up expenses, both in terms of the setting up of accounting items and the period of amortization, has changed significantly from the original industry financial system. There is a big difference between this new provision and the current income tax regulations. Article 34 of the Implementing Rules of the Provisional Regulations on Enterprise Income Tax provides that start-up expenses incurred by an enterprise during the preparatory period shall be deducted in installments over a period of not less than five years from the month following the month in which production or operation commences. Therefore, the one-time amortization of the start-up expenses incurred by an enterprise in the month of production and operation shall be deducted evenly over a period of five years starting from the month following the month of production and operation. When taxpayers declare income tax at the end of the year, they should do a good job of tax adjustment and set up a "pre-tax deduction account for start-up costs" or a register for inspection, so as to lay a good foundation for the accurate declaration of pre-tax deduction (reduction) in the following years.
Example: a joint-stock company in July 2001 to start production and operation, the total start-up costs incurred in the previous period of 960,000 yuan, July amortization of start-up costs, the accounting entries are as follows:
Borrow: administrative expenses - amortization of start-up costs of 960,000 yuan
Credit: long-term amortized expenses --Start-up costs 960,000 yuan
This year's allowable pre-tax deduction = 960,000 yuan ÷ 5 years ÷ 12 months × 5 months = 8 (million yuan), should be adjusted income = 96-8 = 88 (million yuan);
2002 to 2005 should be adjusted annually Income = 96 ÷ 5 = 192,000 yuan;
2006 should be reduced income = 960,000 yuan ÷ 5 years ÷ 12 months × 7 months = 112,000 yuan.
The tax adjustment ledger for start-up expenses is set up as follows:
Start-up Expenses Pre-tax Deduction Ledger
Unit: 10,000 yuan
Instructions for filling in the ledger:
1. Year: Amortization date, the year and month when production and operation began, and subsequent years in the order of analogy.
2. Accounting amortization: the total amount of one-time amortization of start-up costs for accounting purposes.
3. Tax deduction: the amount allowed to be deducted before tax in the current year according to the tax law.
4. Tax Adjustment: Tax Adjustment = Accounting Amortization - Pre-tax Deduction. The result is a positive number for an increase in income and a negative number for a decrease in income.
5. Not yet deducted: the amount allowed to be deducted in future years before tax. The first year has not been deducted according to the current year's tax adjustments to fill in the subsequent year has not been deducted amount = the previous period has not been deducted amount - the current year's pre-tax deductions.
Accounting for Start-up Expenses
Start-up expenses refer to the expenses incurred by the enterprise during the preparatory period, including the salaries of personnel during the preparatory period, office expenses, training expenses, travel expenses, printing expenses, registration fees, as well as exchange gains and losses and interest expenses not included in the cost of acquisition and construction of fixed assets and intangible assets. The preparatory period refers to the period from the date the enterprise is approved for preparatory work to the date of commencement of production and operation (including trial production and trial operation).
The following expenses incurred by an enterprise shall not be included in the start-up costs:
(1) expenses borne by investors;
(2) expenses incurred for the acquisition of fixed assets and intangible assets;
(3) exchange gains and losses and interest expenses during the preparatory period, which shall be included in the value of assets.
The Enterprise Accounting System (Caihui [2000] No. 25) has made significant adjustments to the amortization period of the start-up costs. The original industry accounting system provides that the start-up costs incurred by the enterprise should be amortized in equal installments over a period not exceeding five years from the month of production and operation. Article 50 of the Accounting System for Enterprises stipulates that: "Except for the purchase and construction of fixed assets, all expenses incurred during the preparatory period shall first be summarized in long-term amortized expenses, and shall be charged to profit or loss in the month of commencement of production and operation at one time from the month in which the enterprise commences production and operation. If the enterprise's long-term amortized expense item cannot benefit the subsequent accounting period, the amortized value of the item not yet amortized shall be fully transferred to the profit and loss of the current period." It can be seen that the accounting treatment of start-up expenses, both in terms of the setting up of accounting items and the period of amortization, has changed significantly from the original industry financial system. This new provision of the current income tax regulations and there are major differences.