Adjusted from Capital account

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Daya (Querist)
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15 December 2024 what will be the adjusted from Capital account, specially in the case of Company , LLP and proprietorship firm..

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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12 August 2025 What is "Adjusted from Capital Account"?
This phrase usually refers to adjustments made directly against the owner’s or partners' capital accounts in the books of accounts. It means some amount (like profit, loss, withdrawal, expenses, or corrections) is debited or credited directly to the capital account rather than passing through the Profit & Loss statement.
1. In a Company
The Capital Account usually refers to Share Capital and Reserves & Surplus (like retained earnings).
Adjustments from Capital Account can mean:
Issue or redemption of shares: Changes in share capital.
Correction of errors related to capital (e.g., prior period adjustments).
Revaluation reserves or capital reserves adjustments.
Dividends paid (adjusted from retained earnings).
Capital reduction by the company.
Normally, business profits or losses are not adjusted directly from the capital account; they go through P&L and then to retained earnings.
2. In LLP (Limited Liability Partnership)
LLP has Capital Accounts for each partner.
Adjustments from Capital Account in LLP means:
Capital introduced or withdrawn by partners.
Share of profits or losses allocated to partners (adjusted in their capital/current accounts).
Drawings made by partners.
Any adjustment due to interest on capital or salary to partners.
Correction of partner’s capital balances due to accounting errors.
These adjustments reflect changes in the ownership interest of partners.
3. In Proprietorship Firm
There is only one capital account, owned by the proprietor.
Adjustments can include:
Capital introduced or withdrawn by the proprietor.
Profit or loss transferred to the capital account at the end of the year.
Drawings (withdrawals for personal use) adjusted against capital.
Correction of errors related to capital.
Since proprietorship is not a separate legal entity, the capital account reflects the owner’s investment and retained profits.

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