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Unit 11: Profit and Loss Prior to Incorporation

Working Note: Notes
1. Bank Account
Liabilities ` Assets `
To Vendors (amount received for 50,000 By Preliminary Exps. 30,000
shares)
By Typewriter 15,000
By Balance c/d 5,000
50,000 50,000

2. Adjustment Journal Entries

Date Particulars L.F. ` `
Goodwill Account Dr. 25,000
Building Account Dr. 50,000
To Vendor’s Account 75,000
(Being revaluation of assets)
Sushil’s Company Account Dr. 1,80,000
Mohan’s Capital Account Dr. 1,50,000
To Vendor’s Account 3,30,000
(Being the transfer of balance of capital accounts)
Vendor’s Account Dr. 50,000
To Shares in Sushil Company Limited 50,000
(Being allotment of shares)
Creditors Account Dr. 25,000
To Vendor’s Account 25,000
(Being the transfer of creditor prior to June 2006)
Vendor’s Account Dr. 25,000
To Debtors Account 25,000
(Being the transfer of debtors prior to June 2006)
Vendor’s Account Dr. 5,00,000
To Share Capital Account 5,00,000
(Being issue of shares for the payment of purchase
consideration)
Vendor’s Account
Liabilities ` Assets `
To Shares in Sushil Co. Limited 50,000 By Goodwill A/c. 25,000
To Sundry Debtors 25,000 By Buildings A/c. 50,000
To Share Capital A/c. 5,00,000 By Creditors A/c. 25,000
To Bank (balance given) 17,500 By Sushil’s Capital A/c. 1,80,000
By Mohan’s Capital A/c. 1,50,000
By Balance c/d 1,62,500
5,92,500 5,92,500

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