Expenses Those Directly or Indirectly relate to the Business of the Propritorship Firm is to be Charged to P&L of firm, Expenses which are of purely personal nature are to be treated as Drawings (Reduction in Capital).
Dear Rajesh Ji,
If the expenses related to personal nature than u have to deduct ti from Capital A/c, and expenses related to business need to be transferred to Profit & Loss A/c.If expenses like HDD Rs.4700 not material for properietor need to be w/off in the Profit & Loss A/c.
Journal Entries:-
1. Mr. X A/c Dr Rs 12,500
To Bank A/c Rs 12500
(Being rent paid for residential house, debited to capital A/c)
2. HDD A/c Dr. Rs 4700
To Creditor A/c Rs 4700
(Being HDD purcased capitalised)
3. Mr X A/c Dr Rs 30000
To Bank A/c Rs 30000
(Being personal expense, debited to capital A/c)
4. Membership Fees A/c dr Rs 50000
To BAnk Rs 500000
(Being membership fees paid)
5. Legal & Consultancy Rs 5500
To Bank Rs 5500
(Being surveying & mapping chages paid)
Expenses of HDD & Surveying debited into P&L a/c & other personal expeses transfer in Capital A/c.
CAclubindia
