Rajesh (others) (220 Points)
03 August 2010What will be accounting entries (in the books of proprietorship as well as new pvt ltd co) for conversion of sole proprietorship concern into a private limited company? Proprietor himself is one of the two directors.
Rineesh Raghavan
(MD)
(108 Points)
Replied 04 August 2010
Hi Leenar
You'll find this entry as part of your regular Pre Incorporation areas in Amalgamation in introduction to company accounts.
The journal entry in the books of Company.
1. Purchase Consideration Due
Business Purchase A/c Dr
To Proprietor A/c
2. Takeover of Assets:
Assets A/c Dr
To Liabilities A/c
To Business Purchase A/c
To Capital Reserve
Goodwill A/c Dr
3. Discharge of Consideration
Proprietor A/c Dr
To Equity Share Capital
In the proprietor account, you are required to transfer everything to realisation account. The entries very similar to regular amalgamation entries in the books of the selling Company. Transfer resultant gain or loss on realisation to Proprietor's Capital Account.
Rineesh
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