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In an internal reconstruction scheme, fictitious assets (e.g. preliminary expenses, deferred revenue expenditure) are typically:
ACapitalised again
BWritten off against Capital Reduction A/c
CSold to creditors
DCarried forward at book value
Answer & Solution
Correct answer: B. Written off against Capital Reduction A/c
1. Step 1: Capital Reduction A/c absorbs writing off of fictitious assets and accumulated losses.
2. Step 2: This brings the balance sheet to a true & fair view.
3. Step 3: Hence (B).
_Source: ICAI BoS CA Inter Paper 1, Ch 14 "Internal Reconstruction"_