Credit of unpaid statutory liability to capital account

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

27 October 2012 Our's is a partnership firm liable for audit u/s 44 AB. In computation of income the unpaid statutory liability is added to the income u/s 43B. As because the unpaid statutory liability is taxed can we credit the said amount to the capital accounts of the partners in their profit sharing ratio and whenever the said liability is paid in future the same will be paid by debiting the capital accounts whether this treatment is allowable.

Vivek Hebbar

Vivek Hebbar (Expert)
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27 October 2012 Dear Querist

The accounting treatment is different from treatment for tax liability.

The addition of unpaid statutory liability to income does not change the accounting treatment.

The unpaid liability would be appearing in the balance sheet under current liabilities. When the same is paid in subsequent year, it would be cleared off from the current liabilities.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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28 October 2012 In case this liability is no more paying in future then yes you can do it but if it is to be paid in future then no it cannot be credited to partner's capital account.

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