. How is profit prior to incorporation treated as ?

Profit prior to incorporation refers to the profit earned by a business before it is legally incorporated as a company. Here's how it is treated:

1. Identification: The first step is to identify the profits that were earned prior to the incorporation of the business. This could be from the sale of products or services, or any other income-generating activities.

2. Allocation: The next step is to allocate these profits. Since the business was not yet incorporated, these profits do not belong to the company. Instead, they are usually allocated to the promoters or initial owners of the business.

3. Accounting: In the accounting records, these profits are not recorded as part of the company's income. Instead, they are usually recorded as a liability, as they represent an amount that is owed to the promoters or initial owners.

4. Taxation: Profits prior to incorporation are not subject to corporate tax, as they were earned before the business was incorporated. However, they may be subject to personal income tax, depending on the tax laws in the relevant jurisdiction.

5. Disclosure: Finally, these profits should be disclosed in the financial statements of the company, to provide a complete picture of the company's financial history. This is usually done in the notes to the financial statements.