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drawing limit in proprietory firm

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Querist : Anonymous

Querist : Anonymous (Querist)

25 November 2010 Please explain me drawing limit for proprietory firm, any % with profit or capital?

CA. BHAVIK DILIPBHAI MEHTA

CA. BHAVIK DILIPBHAI MEHTA (Expert)
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26 November 2010 The profit made during the year is transferred to Proprietor's capital account. Hence the drawing can be to an extent of the Capital account + Net profit made during the year.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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26 November 2010 A business man employs capital for running the business and to earn profits. It depends upon his business necessities to employ more capital or to withdraw extra capital.
However, if the proprietor is having no other sources of income, to meet his household expenditure he has to make withdrawals from the Prop.firm.

So it is a quite subjective matter depending upon the proprietor's outlook.

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