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Treatment

04 April 2016

M/s X was a proprietary concern doing the business of Architectural consultation. How to treat the following transaction

Amount received from proprietor Rs. 5000
Amount received from proprietor Rs.5000 returned
Proprietor travelling abroad (China) for business purpose Rs.1,50,000/-
Mr. A is the client (Sundry debtor) of M/s X. Rs.10000/- paid by M/s. X to someone else on behalf of Mr. A

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CA Mohit Salvankar (Practising Chartered Accountant) (33 Points)
Replied 04 April 2016

Dear Rajesh,

1) Treat infusion of funds by Proprietor as Capital introduced and withdrawal as Drawings.

Its better to maintain Fixed Capital A/c and Current Capital A/c in books of accounts. And to pass irregular infusion and drawings entries in Current Capital A/c.

2)Business Tour Exp if paid by proprietor from own pocket, then treat it as funds infused. Entry would be

Tour Exp Dr.........

TO Current Capital A/c

3) In case where business debtor has made payment to Proprietors Personal Creditor,

Treat it as Withdrawal of Capital. Entry would be

Current Capital Account Dr.........

To Sundry Debtor.................

In case you need any further clarification, plz feel free.

Thanks & Regards,

CA Mohit Salvankar

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