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AA-19-Accounting Treatment for Conversion of Sole Proprietorship into Partnership

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Accounts Officer

563 Points Posted on 11 June 2023

All Respected members,

Please educate me if a sole proprietorship convert into a partnership firm and a coming partner is not investing anything but share of profit of both partners will be 50% each; how accounting treatment will be done at start ?

Further, supose that if some amount in sole proprietorship bank account and we transfer it to partnership bank account what will be accounting treatment for this as well ?

Thanks in advance for your precious time and efforts to reply of this query.

Replies (6)

Quick Summary

This discussion addresses the accounting treatment when a sole proprietorship converts into a partnership. It specifically covers scenarios where a new partner joins with no capital investment but receives a 50% profit share, and how to account for the transfer of funds from the sole proprietorship's bank account to the new partnership's bank account. The provided guidance includes journal entries for transferring the proprietor's capital and bank balance to the partnership.

RAJA P M

"Do the Right Thing...!!!"

77792 Points Posted on 11 June 2023

All transfers from Proprietorship to Partnership can be account partner's capital (who is the proprietor of the old firm).

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Accounts Officer

563 Points Posted on 12 June 2023

Dear Mr. Raja PM,

Thanks for your kind reply.

Can you please share the journal entry of this transfer ?

Further, let me know if proprietor transfer amount from their bank account to partnership account at the time of formation what would be journal entry of it ?