Kannan Narayanan (CA) (30 Points)
11 February 2011I have a doubt regarding capital account in balance sheet.
Let us assume that a proprietory business does not do any activity during a particular year. Hence, I assume that there no profit nor loss. Hence, there is no P&L account.
Now, interest on capital will be added to the capital account in the liability side of the balance sheet.
I would like to know what is the corresponding entry done to the asset side of the balance sheet.
Suresh Prasad
(www.aubsp.com)
(15630 Points)
Replied 11 February 2011
The entry would be .....
1. Interest A/c..................Dr
To Interest on Capital A/c
2. P/lL A/c..................Dr
To Capital A/c
Thus the debit balance of P/l should be shown in Assets side of B/s And Interest on Capital Shouls be should be shown in the Liability side of Balance Sheet.
Kannan Narayanan
(CA)
(30 Points)
Replied 11 February 2011
So, can't be a business which has no P&L a/c ?
There are many cases where real estate players who recognise their revenue on contract completion basis do not file a P&L account but file only a Balance sheet ...
Suresh Prasad
(www.aubsp.com)
(15630 Points)
Replied 11 February 2011
| Originally posted by : Kannan Narayanan | ||
 |
So, can't be a business which has no P&L a/c ? There are many cases where real estate players who recognise their revenue on contract completion basis do not file a P&L account but file only a Balance sheet ... |
 |
Download the Attached file and read carefuly.........
AVIJIT
(CA FINALIST)
(370 Points)
Replied 18 February 2011
As far I think if it is a proprietorship firm you cannot charge any Interest on Capital. Interest on Capital is charged in Partnership firm not Proprietorship.
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