Conversion of Proprietorship into Private Limited Company

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