Treatment of accumulated losses

This query is : Resolved

deepak K Gujrati (Querist)
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21 July 2009 This is a case of a limited company( unlisted closely held)
As at 31-3-2009 the balance sheet shows the following balabnes:

Share Capital Rs 65 lacs
Unsecured loan 60.39 lacs
Total 125.39 lacs

Assets:
Fixed Assets Land 1.79 lacs
Net Current Assets .56 lacs
Accumulated losses123.04 lacs
Total 125.39 lacs

The company is not in operation since 2001.
The company is also not paying interest on unsecured loan. As the loans are also of shareholders and directors these can be waived off also.

Please suggest how this balance sheet will be closed.

Thanks & Regards

P B Srivathsan

P B Srivathsan (Expert)
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22 July 2009 If you want to close the books, the following entries should be passed.
1. You have to close the land account and account for the profit or loss on disposal.
2. Need to dispose other non cash current assets and record the profit or loss on sale.
3. Use the cash balance available to pay the unsecured loans. The unpaid balance, waived by the lendors will be credited to p&l accont.
4. The balance in cash, if any, will be paid to the share holders.
5. Now the balance in Share capital account and Accumulated loss account [including effect of new entries]will tally. Pass an entry to close both these accounts.

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