07 January 2015
A partnership firm consisting of two brothers and their father. They have received an amount from mother ( of two partners ) and paying intt @ 12% pa. now mother want to gift that amount to his sons. What is the procedure. will that require special treatment of simple journal entry will do? please guide me on the issue .
07 January 2015
The matter quoted by you appears to be conversion of loan into capital. Assuming that loan given by mother of partners in the books of the firm is now not payable you may simply debit the loan account and credit corresponding amount in the capital account of respective partners.
From Income tax point of view also there is no problem on such kind of conversion of loan into capital.
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