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Asset transfer from Proprietorship to Partnership between to legal heir partner after death of Prop.

Soumya Laha (Advocate & Tax Consultant)   (4684 Points)

28 September 2021  

A sole proprietor of a Trading Establishment has been deceased and his two legal heirs now formed partnership to run that Trading Establishment. The Partners have their personal business and they also invested capital to the Partnership firm apart from inherited assets. How to show these investments in Partnership Firm's Balance Sheet and Partner's Personal Balance Sheet ?

 3 Replies

Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294)   (2905 Points)
Replied 28 September 2021

When a partner invests noncash assets in a partnership, the assets are recorded at the partner's book value.

Anytime a partner invests in the business the partner receives capital or ownership in the partnership.  You will have one capital account and one withdrawal (or drawing) account for each partner.

Soumya Laha (Advocate & Tax Consultant)   (4684 Points)
Replied 28 September 2021

A partner introduced Rs. 100,000 as non cash assets and Rs. 100,000 as cash in the partnership firm. Capital interest will be calculated on Rs. 200,000 or Rs. 100,000 ?

CA Raj Doshi (Practising CA) (5487 Points)
Replied 29 September 2021

Dr. Non cash asset 1L
Dr. Cash 1L
Cr. Partners capital account 2L

interest on Rs. 2 lakhs

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