Accounting Treatment LLP & PROPRIETOR

This query is : Resolved

RITIK JAIN (Querist)
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16 August 2022 Suppose, Mr. A is having proprietorship business working with his brother Mr. B. Now both formed a new LLP with equal share to carry all trade activities through it. The proprietorship is still active though. Now, the initial capital (5 lacs) of LLP have been brought from proprietorship's current a/c, which is to be shown as equally contributed by both in LLP books. How to pass entries in both firms regarding this?(whether to show it as loan or capital withdraw in proprietorship)

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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18 August 2022 Show it as capital withdrawal from proprietorship.
Pass entry for capital constitution of both.
The capital contribution of B may be treated as gift from relative.