I am bit confuse in the accounting concept for partnership interest, if a company have partnership interest in an firm and firm incurred some loss during the year that what would be the accounting treatment for the partnership firm for loss distribution to company have partnership interest and what accounting to be done in the book of partner company,
after some analysis i found that above enties have error... In case of partnership interst patner of business dont have investment in partnership firm but he have a right or obligation to share profit or loss....
So if the partner dont have investment in firm so how he credit the investment account;;; If he do so....so the balance sheet shows the negative investment which is not logical... Please make me correct if i am wrong...
29 June 2010
Hi again Anilji, I apologise for giving late answer as i m not the frequent visitor of this sight. The above entries are absolutely right. for the same u can check schedule VI part I to Cos Act. Under the head "Investments" the co. will have to disclose separately the invt. in partnership firm.
29 June 2010
But it seems that u r IPCC student. u can also refer to ur past exam questions where a firm was hving 3 partners, an individual and two cos (Mr. X, Y Ltd. and Z Ltd.) and investment account was asked in the books of Y Ltd. and disclosure in Z Ltd's books. If u hv any further doubt, revert back to me. I will surely reply, eventhough late. Regards, CA Shakuntala Chhangani
12 August 2010
Hi again Anil, the answer to ur query is : If the investment is 0% then also it may be covered under partnership Act which clarifies that capital contribution depends on mutual agreement amongst the partners. U will have to look into the partnership deed to decide about whether the co. is a partner or not. if the answer is yes then as a result of deducting the loss, the investment account will become negative. there is no provision in co. act about the disclosure of the same. But as per general practice, it can be shown as deduction from general reserve for disclosure purposes at the balance sheet date. If the co. is not a partner then it must be a guarantor as it is bearing the burden of loss. in which case u will have to provide for the loss in the normal way. Regards, CA Shakuntala Chhangani
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