Unsecured loans to capital a/c

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Querist : Anonymous

Querist : Anonymous (Querist)

19 September 2013 Dear Sir,

I am working in a proprietoryship firm, i want to know whether unsecured loans in the books can be transfered to capital a/c?

As far as i am thinking, if we decide that the liablity of unsecured loans would be born by the proprietor, and thus proprietor would introduce the capital in the books of proprietoryship firm, how correct i am ? and is there any tax and accounting implication that i may be ignoring? please experts reply quickly

Nikhil Kaushik

Nikhil Kaushik (Expert)
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21 September 2013 It is advisable that unsecured loan are appropriately shown as outside liabilities only.

If you show it as capital, then it shall also result in inference that the lender has effected remission of the loan which would result in income to the proprietorship. This shall be akin to remission of creditors and accordingly taxable.

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Querist : Anonymous

Querist : Anonymous (Querist)

25 September 2013 Thank u sir, for your valuable answer

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