Question

Explain Distribution of Cash from Sale of Asset?

Answer 1

Explain Distribution of Cash from Sale of Asset..:-

The word "Distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary.
A distribution also refers to a company's or a mutual fund's payment of "Stock, Cash, and Other Payouts" to its shareholders. Distributions come from a no. of various financial offerings. However, the payment for the distribution typically goes directly to the beneficiary, either electronically or by cheque methods.

"The Sale of an Asset for disposal purposes is similar To a regular asset sale." Unlike a regular disposal of an asset, where the asset is abandoned and written off the accounting records, an asset disposal sale involves a receipt of cash or other proceeds.
When the sale takes places, a journal entry is recorded that,
(1) updates depreciation expense,
(2) removes the asset and its accumulated depreciation account off the balance sheet,
(3) increases cash or other asset with the amount of proceeds received, and
(4) records a gain or loss on the sale.

People and Entities own or invest in corporations aiming to derive value from their ownership. These owners, or shareholders, often realize this value through the corporation's increase in value and the associated appreciation in the price of its shares. For most private corporations, shareholders realize this value through the profit distributions they receive. Profits are distributed in cash. When a corporation shuts down, it also may distribute its assets to shareholders.

Distributions paid to shareholders reduce stockholder's equity and its component, retained earnings. Distributions of cash, or cash dividends, are typically called "dividends." These distributions are reflected on corporation's balance sheet and in the financing section of the cash-flow statement. Companies typically re-invest earnings to maintain operations and fund growth. Conversely, mature, stable companies often distribute a high percentage of earnings as dividends.

Every Companies use their assets to support operationsin it's companies. Corporations sell assets they no longer need to generate cash to purchase other assets, pay off debt or support operations. Therefore, healthy corporations rarely distribute non-cash assets to shareholders. Companies generally only distribute assets when the company has partially or wholly failed and is in the midst of shutting down a portion or all of its business at entire level.

If a state fails, it only distributes the assets that remain to shareholders after it has paid all of its remaining creditors. A company typically finds it easier to sell its properties and allocate the proceeds. However, if the company has little assets, considers it too time consuming to find investors, or has only one /two shareholders, it must parse the assets according to the valuation of the assets and the ownership interest of the shareholder.