Operating losses incurred during the start-up years of a new business should be
A) accounted for and reported like the operating losses of any other business.
B) written off directly against retained earnings.
C) capitalized as a deferred charge and amortized over five years.
D) capitalized as an intangible asset and amortized over a period not to exceed 20 years.

Question

Quizplus · Accepted Answer

Operating losses incurred during the start-up years of a new business should be accounted for and reported like the operating losses of any other business. This means that they should be included as an expense in the income statement and result in a net loss for the period. Writing off directly against retained earnings, capitalizing as a deferred charge, or capitalizing as an intangible asset are not appropriate treatments for start-up losses.

Operating Losses Incurred During the Start-Up Years of a New