Interest on capital
This query is : Resolved
Nishant Kumar
(Querist)
09 June 2017
What is the need for Interest on Capital in a Sole Proprietorship? I understand that as per Business Entity Concept, Owner is separate from Business, and hence he requires interest on the amount invested by him in the Business. However, really, he is the one carrying on the business. So, in a way he is charging interest on his own money. Please explain!
CA Rashmi Gandhi
(Expert)
09 June 2017
No interest on capital is to be charged in case of sole proprietorship firm.
09 June 2017
An individual can't transact with himself to take commercial advantage. Hence proprietor can't levy interest on the capital brought in the proprietory business.
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