IN partner ship ,
-2 partners A & B are there
-C' loan is given in balance sheet
-A & B admits C as partner
than how to bring capital of C in the books by cash or by loan??????
which is better??
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Account Quary . HELP???
Replies (10)
By loan is better..........
the loan of the incoming partner should b converted into his capital i guess..
Thanks 2 all
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
i agree with nitin singhal
Dear Friends
If their is any int which is not paid till now or int which will be paid on due date can than also u can pay it in cash or also convert it in capital with loan
with the above said entry by nitin and Int will also be debited in P n L A/c because it exp till the joining of C as Partner.
Regards
agree with nithin...
accounts
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-
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