In the case of individual books how to maintain books when partner in LLP/partnership firm
This query is : Resolved
20 October 2024
what will be the treatment in the case of individual books
when only single single ledger is maintained , then no issue but
when Fixed or current capital maintained,
the how to make adjustment of profit /Loss or other transaction,
when only single single ledger is maintained , then no issue but
when Fixed or current capital maintained,
the how to make adjustment of profit /Loss or other transaction,
12 August 2025
1. When Single Ledger is Maintained (Simpler Case)
Only one capital account per partner.
All transactions (contributions, drawings, profit/loss share) directly posted here.
Profit or loss adjusted by crediting/debiting this ledger at the end of the period.
2. When Fixed and Current Capital Accounts Are Maintained (More Detailed)
Fixed Capital Account: Represents the initial capital contribution by the partner. Usually not adjusted during the year.
Current Account: Used to record drawings, share of profits/losses, interest on capital, salary to partners, and other adjustments during the year.
How to Make Adjustments:
a) At the time of Profit/Loss allocation:
Calculate net profit/loss for the period.
Distribute profit/loss as per the partnership deed (ratio).
Credit each partner’s Current Account with their share of profit.
Debit each partner’s Current Account with their share of loss.
b) Interest on Capital / Drawings:
Interest on Capital is credited to Current Account.
Interest on Drawings is debited to Current Account.
c) Drawings:
Deduct drawings from partner’s Current Account as they occur.
d) Transfer of Current Account to Fixed Capital Account (if any):
Sometimes, partners agree to transfer the balance of Current Account to Fixed Capital Account at the end of the year.
This requires a journal entry transferring the closing balance of Current Account to Fixed Capital Account.
Only one capital account per partner.
All transactions (contributions, drawings, profit/loss share) directly posted here.
Profit or loss adjusted by crediting/debiting this ledger at the end of the period.
2. When Fixed and Current Capital Accounts Are Maintained (More Detailed)
Fixed Capital Account: Represents the initial capital contribution by the partner. Usually not adjusted during the year.
Current Account: Used to record drawings, share of profits/losses, interest on capital, salary to partners, and other adjustments during the year.
How to Make Adjustments:
a) At the time of Profit/Loss allocation:
Calculate net profit/loss for the period.
Distribute profit/loss as per the partnership deed (ratio).
Credit each partner’s Current Account with their share of profit.
Debit each partner’s Current Account with their share of loss.
b) Interest on Capital / Drawings:
Interest on Capital is credited to Current Account.
Interest on Drawings is debited to Current Account.
c) Drawings:
Deduct drawings from partner’s Current Account as they occur.
d) Transfer of Current Account to Fixed Capital Account (if any):
Sometimes, partners agree to transfer the balance of Current Account to Fixed Capital Account at the end of the year.
This requires a journal entry transferring the closing balance of Current Account to Fixed Capital Account.
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