What is fictitious asset ? And what are its examples?
These are the amounts which are shown as Assets but do not have any real value. Infact, these are not assets in reality.
These are revenue expenditures which are of capital nature; beacuse of this they are not debited to the Profit and Loss A/c fully in the year of their occurrence. But these are charged to revenue over some later years on an appropriate basis (ex. straight line basis).
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Example:
Discount on issue of shares, preliminary expenses, underwriting commission, etc.
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The reason why these are not fully charged to profit in the year of occurrence is to comply with "Maching Principle" of accounting. The intended benefit from such expenditures is not expected to be received wholly in the 1styear itself. Instead it is expected to accure over some later accounting periods.
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Now, to ascertain correct profit or loss, the benefit should be matched with its related expenditure. So, if benefit is distributed over a few accounting periods, its expenditure should also be distributed over those periods.
Till the time, the expenditure is matched with its revenue/benefit (i.e. benefit has not accrued till that time), it appears as an Asset.
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The amount appearing as an Asset for such expenditures indicates that the related benefit is yet to be received over subsequent years. When some benefit is received in a later year, appropriate portion of the expenditure is then debited to the Profit and Loss A/c (i.e. written off from the Books).
Actually,this ans is not mine.I saw it somewhere.