kavita aggarwal
(. )
(135 Points)
Replied 15 May 2010
the loan of the incoming partner should b converted into his capital i guess..
Nitin Singhal
(Gaining knowledge...)
(320 Points)
Replied 15 May 2010
Hello Utsav ji,
If C has additional funds it would be better to bring that funds to partnership business. Since it will add value to business. Otherwise generally loan is converted into capital . The entry is:
C's Loan A/c Dr.
To C's Capital A/c
Nitin Grover
(CS)
(1228 Points)
Replied 15 May 2010
Bhavik Davda
(Proprietor)
(238 Points)
Replied 16 May 2010
Two aspects of the matter( very general and known to all of us)
If the loan has been coverted in to the capital- in future it may get affixed in the partnership act rules for ( interest rate is more than 12%)- Further when the perfomance of the firm is not good or even a loss- a loss of interest may take place to the partner having loan. It is better to convert the loan in to capital if the firm is not in need of more money and can sacrifice the existing profits. Depends upon the case-
CAclubindia
