Drawing more than capital -itr-4

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 September 2013 A person runs small business and has following details:-
Capital-70000
Profit-50000
Total 120000
Cash-100000
Bank-20000
During the year the person spends Rs.80000 for his personal use out of the above cash. How to pass entry for such expenditure if such amount shown as drawings then capital would be negative.
I know this expenditure would be disallowed just asking for accounting purpose.

@VaibhavJ

@VaibhavJ (Expert)

07 September 2013 Treat it as Loan!

Thanks

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)

07 September 2013 By transferring the profit the the Capital account then capital account balance will become Rs.1,20,000 from this passing of drawing entry for Rs.80,000 then Capital balance shall be Rs. 40,000 i.e positive value.

If you don't like to do as like above then create a current account of the partner all pass the drawings entry to such current account and this current account shall be disclose at assets side of the balance sheet as a current assets.

OM SAI SRI SAI JAI JAI SAI

Querist : Anonymous

Querist : Anonymous (Querist)

07 September 2013 but mr. Dintakurthi profit amount would be transferred on last day of the year and if entries are made by treating all cash withdrawn as drawing capital balance would go negative during the year.

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)

08 September 2013 You didn't mentioned regarding the date of the entries passing. I.e there is no clarity regarding is you asking for at the end of year entry or in the middle of the entries. Generally it would seems to at the end of the year so i assumed your query for at the end of the year and suggest you like that.

You asking about in the middle of the year then create a current account on the name of proprietor and all his drawings debit to such account and at the end of the year transfer such current account balance to the capital account.

OM SAI SRI SAI JAI JAI SAI

Querist : Anonymous

Querist : Anonymous (Querist)

09 September 2013 and in ITR-4 this loan account to be shown?means in ITR balances to be shown before transferring current account to capital account

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)

09 September 2013 Itr shall be fill after finalisation of accounts. So at the time of finalisation you shall transfer your profit to the capital account as well as the current account also shall be transferred then your capital balance comes to positive and as follows.

70000+50000-80000 = 40000.

OM SAI SRI SAI JAI JAI SAI

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