Can you please

Personal expesnes should be shown as drawing. and profit of rs. 7.50 Lakhs is correct

Dear Rashmi,

              Drawing in proprietorship firm is considered opposite of Capital Introduction in firm.

In P&L all expenses related to business should be included but Drawing is not a business Expense hence should not be transferred in P&L A/c. It should be deducted from the Capital of the propreitor through Capital A/c.

Profit Calculated by your Side is absolutely Right.

Suppose proprietor Capital A/c on Beginning of the Year is 5000000 now see how the treatment will be done for the drawing

Capital in the Beginning       5000000

+ Profit of the Year                  7500000

-  Drawing during the year    (7000000)

Capital in the end                    5500000

Sorry sir,but, how it would be Rs. 7.5 lakh, could you explain please, you mean 75 lkah,  

 Regards

Rashmi

Sales                                  30000000

- Purchase                       (20000000)

- Business Expense       (2500000)

Profit & Loss                     7500000

As i explained that Drawing will not come in P&L A/c , it will be deducted from  Capital A/c.

you re right shivam gupta,

Suppose there is less capital introduced by the proprietor and the personal expenses/drawings  are more than current profit, then what would be the treatment. 

Will you be more specific.

Ok…..

Capital Introduced by proprietor Rs. 1 lakhs

Drawings/personal Expenses are. 80 lakhs

 Net Profit Rs . 75 lakhs

What would be the accounting treatment in above situation? 

Capital                     100000

+ Profit                   7500000

-  Drawing           (8000000)

Closing  Capital   (400000)

Will be shown on Asset Side of the Balance Sheet & it may be firm will charge Intrest on that Amount , if policies of firm say so otherwise it will be shown in Asset side of the Balance sheet.

Thats what  I/we have done, but they are not ready to accept it, according to them personal expenses are to be treated as business expenses. 

If they are saying Drawing is a Business expense then just ask him the Basis for such consideration. 

Tell them that those expenses are not incurred for the business then how can you people treat the same as Expense. Tell him that the amount of Drawing should be reduced from the amount of Capital.

Ok I hope my explanations have suffice your query

Sorry, Pl read as 75 L.

Originally posted by : Deepak Tapse
	Sorry, Pl read as 75 L.

Yes Sir,

I have already considered the same.

Thank you very much for your valuable advice