Surplus distribution

what to do with the SURPLUS available in a private limited company with three directors, after dissolution.
Replies (2)
Quick Summary
This discussion explains how to handle surplus funds in a private limited company after dissolution. The process involves realisation accounting, where assets are transferred to a realisation account. Any remaining surplus is then distributed to the partners' capital accounts according to their profit-sharing ratios after all liabilities and expenses have been settled.

The usual procedure is realisation accounting. The surplus is transferred to partners capital account

Profit and loss dr

Reserves and surplus dr

To Partners capital/ Current accounts.

Assets are transferred to realisation account. When a partner takes over the assets

Partners capital ac dr

to realisation account 

similarly after outside liabilities are met by partners or company, relevant adjustments to realisation accounts. Finally, all expenses, liabilities cleared off either by partners or company, profit is realised into partners capital account.

If it is profit realised after settlement

realisation account dr,

Partners capital Cr 

if it is a loss realised after settlements

Partners capital dr

Realisation account Cr.

(I concised all the entries in the end)

I forgot to mention clearly, create three partners accounts and transfer amounts equivalent to their profit sharing ratios. 

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