15 November 2014
Partnership engaged in Builders & Dev. business in its first year of business has no Income & Exp.but land only as a Investment.
My Question is-
1. How the PL & B/S will looks like during its first year.
2. What will be remuneration in such case where firm do not have any Profit.?
16 November 2014
It is a Partnership business. Study the clauses of Interest and remuneration to partners.If there is no such remuneration/interest no need to provide any.If there is clause for remuneration and/or interest on capitals, do consider.If the deed says any clause like, no remuneration shall be provided with some condition like,no sale-no remuneration, then do not allow. For first year, the land purchased, as it is the business asset, it is to be shown under purchases as well as under Stock in Trade( as it is not yet sold). As understood from the query given, till sales are affected, whatever work is done, it will be shown under Work in progress. But check Sec.44 AD and Accounting standard on Construction Contracts for showing certain percent of work completed in the Profit and Loss a/c. If the deed simply says, remuneration to working partners is to be paid, even there is NO profit, remuneration is to be ppaid. Or else, make an amendment to the deed to that affect
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