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Negative balance partners capital show in balance sheet

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Quick Summary

When a partner withdraws more than their capital contribution, their capital account can show a negative balance. This can be presented on the balance sheet in two ways: either on the asset side as a debit balance, or on the liability side with a minus sign. The latter is often preferred for consistency with tax return formats.

Kollipara Sundaraiah

Kollipara Sundaraiah (Querist)

25 October 2021 Sir,
A partnership firm cash withdrawal some amount one of the partner after negative balance show in partner capital account.
Question:
Negative balance Amount partner capital account show procedure in balance sheet.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

26 October 2021 Transfer the debit balance to partner's loan account.

CA Raj Doshi

CA Raj Doshi (Expert)

02 November 2021 It is a matter of presentation. option 1 - Capital account debit balance can be shown on asset side. option 2- Also,can be shown on liability side with minus sign. I prefer option 2 which is in line with Balance sheet format in ITR

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