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Takeover of proprietory concern by private limited company

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02 February 2012 a client running business under proprietorship concern, chnaged the proprietory status and formed a private limited company on 03.03.10. A meomrandum of understanding for takeover of business was entered b/n the proprietor and the newly formed company on 01.04.10.For FY 10-11 which is the company's first year of audit, it has shown in its trading a/c opening stock as well as opening WDV in its fixed asset schedule. Is the accounting treatment given proper? As far as company law suggests a proprietorship cannot be converted into company. It is only taken over by another company - which in this case is the newly incorporated one.. Pls advice ASAP
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CA. Hari Kishan

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CA. Hari Kishan (Expert)
02 February 2012 In my view, it cannot be taken as opening balance and the same is being taken over / purchased by a separate legal entity.
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