nagaraju

• Apr 17th, 2007

 

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  

GOWRISANKAR RAJAGOPALAN

• May 9th, 2007

 

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.