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Accounting treatment in books

akansha (CS) (59 Points)

26 October 2012

Respected Professional Colleagues,

A partnership firm has been converted into a Private limited company under the provisions of Part IX of the Companies Act, 1956. Kindly suggest me the accounting treatment of -

- Reserves and Surpluses of the firm in the books of the Company.

- Floating capital treatment in the books of the Company and,

- Whether premium can be charged by partners as securities premium account is intended to be created in the balance sheet of the company ?

Please reply at the earliest as it is urgent.

Thanks,

Akansha.

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7 Replies

CA Lokesh Pokharna (CA (Ahmedabad Bhilwara Chittorgarh)) (4128 Points)
Replied 26 October 2012

conversion means all assets & liabilities are taken as it is in the books of company.

.. all assets & liabilities except (capital of partners,and R & S) should be taken at book value in co. books.

than partners claim( fixed cap+floating cap+share in R & S) should be discharged by way of issuing equity shares

for e.g. x y z are partners psr 1:2:3

all assets 12 lacs

capitral x 1

y 2

x 3

R & S 3

other liab 3

co. books

equity shares 9 lacs

other laib 3 lacs

assets 12 lac

. above e.g for common understanding, calculations may be change as per terms & conditions between partners..

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akansha (CS) (59 Points)
Replied 26 October 2012

Thanks Lokeshji. But, does it mean that partners' capital and reserves and surpluses shall be taken as paid up capital i.e. fixed capital of the Company. Then what will be the floating capital and reserves for the Company? Please clarify.

CA Lokesh Pokharna (CA (Ahmedabad Bhilwara Chittorgarh)) (4128 Points)
Replied 27 October 2012

yes, partners all capital & R & S claims will be equity capital of co. in normal circumstances. there will not be any floating capital of company

akansha (CS) (59 Points)
Replied 27 October 2012

Sir,

Further, i would like to clarify that whether partners' capital and reserves and surpluses be bifurcated into paid up capital, securities premium account and unsecured loans of the Company as the Company does not want to show the full amount as paid up capital of the Company. And, if its not possible then what is the reason behind it..? Please reply.

CA Lokesh Pokharna (CA (Ahmedabad Bhilwara Chittorgarh)) (4128 Points)
Replied 28 October 2012

if co., dosent want to show full amount as paid up equity capital than it can be bifurcated into sec. premium also. for this shares to be issued at premium. e.g. face value 10 premium 5

& if total claim is 7.5 lac than no. of shares issued will be 50000

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akansha (CS) (59 Points)
Replied 29 October 2012

ok thanks sir.

Mehta (senior employee) (49 Points)
Replied 02 January 2014

Dear Lokesh,

Please help further can we bifurcate the partners capital into share capital and unsecured loan. Say i am having partners capital 90 lacs now i want to keep only 1Lac as share capital and rest as unsecured loan. What is more beneficial , LLP or Pvt Ltd. company