General Ledger - how do you record retained earnings when you sold company (assets only), for closing of books that s

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how do you record retained earnings when you sold company (assets only), for closing of books that sold?

Total Answers and Comments: 2

Last Update: May 10, 2007 Asked by: tina sterling

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April 17, 2007 00:30:41

nagaraju

RE: how do you record retained earnings when you sold ...

Hi

When company dispose there assets the following transaction takes place
Assets Liabilities + Shareholders Equity

Suppose assets beginning balance is $4900 and accumulated depreciation is $1900
When you want sell both of these should be eliminated from account book so asstes $4900 and accumulated depreciation debited by $1900 so both assets will be clear.

Let us come for retained earnings
This depends on profit or loss.
When it is disposed it depends upon assets sold more than or less than book value.
If more than book value is retained earnings is credited if less than book value is retained then earnings is debited

I hope it is clear

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May 09, 2007 23:32:24

GOWRISANKAR RAJAGOPALAN

RE: how do you record retained earnings when you sold ...

The question has to be split into two.

Selling the assets of the company and closing the books.

First is sellig the assets of the company. This is done with what intention? Whether to close the running business or to start other line of business. Precisely whether the company is to be liquidated or continued.

If not liquidated profit or loss on sale of asset is recognised in the books which will be reflected in the profit and loss account and will give the net result of the business.

Second point is closing of the company
If the company is to be liquidated after the sale then the retained earnings ie reserves and surplus will be transferred to shareholders account. Thereby books are closed and the shareholders will receive their share of capital which is returned back.

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