I have a doubt regarding capital account in balance sheet.
Let us assume that a proprietory business does not do any activity during a particular year. Hence, I assume that there no profit nor loss. Hence, there is no P&L account.
Now, interest on capital will be added to the capital account in the liability side of the balance sheet.
I would like to know what is the corresponding entry done to the asset side of the balance sheet.
The entry would be .....
1. Interest A/c..................Dr
To Interest on Capital A/c
2. P/lL A/c..................Dr
To Capital A/c
Thus the debit balance of P/l should be shown in Assets side of B/s And Interest on Capital Shouls be should be shown in the Liability side of Balance Sheet.
So, can't be a business which has no P&L a/c ?
There are many cases where real estate players who recognise their revenue on contract completion basis do not file a P&L account but file only a Balance sheet ...
| Originally posted by : Kannan Narayanan | ||
 |
So, can't be a business which has no P&L a/c ? There are many cases where real estate players who recognise their revenue on contract completion basis do not file a P&L account but file only a Balance sheet ... |
 |
Download the Attached file and read carefuly.........
As far I think if it is a proprietorship firm you cannot charge any Interest on Capital. Interest on Capital is charged in Partnership firm not Proprietorship.
CAclubindia
