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Penalty to partnership firm

05 October 2021

If we want to debit any penalties to partners capital account, so should we debit it equally to every partner or should we debit it in their profit sharing ratio

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10 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195283 Points)
Replied 05 October 2021

What is the nature of penalty? Why not over firm?

Akshay KP (9 Points)
Replied 05 October 2021

Why such penalties is debiting to partners capital instead of P&L A/c as such penalties is in nature of business expenditure

Yogesh Sukhwani (33 Points)
Replied 05 October 2021

Its gst penalty

Akshay KP (9 Points)
Replied 05 October 2021

Then debit it to P&L A/c

Yogesh Sukhwani (33 Points)
Replied 05 October 2021

Reason why

Akshay KP (9 Points)
Replied 05 October 2021

It's a business expenditure not partners personal expense

Yogesh Sukhwani (33 Points)
Replied 05 October 2021

But any amount paid for violation of the act should not be debited in pl

Akshay KP (9 Points)
Replied 05 October 2021

Such expenditure is not allowed to claimed as expenses while computing tax. it's should disallowed

narendra (Accountant) (281 Points)
Replied 12 September 2022

How about common "personal" expenses of partners paid from partnership business? like,

1) Expenses of all partners and their families going together on personal tour which also includes non-apportionable expenses like food local conveyance.

2) Home renovation and puja expenses paid for a home wherein all the partners are also members of the family staying together in that home.

do we debit such expenses to each partner Equally or in their Profit sharing ratio (i.e. when PSR is not equal for all partners)?

narendra (Accountant) (281 Points)
Replied 12 September 2022

Also penalty/payment for "Traffic Challans" issued to employees (like office delivery person, sales person, field technicians, etc.) which are Not allowable as expenditure (currently booked under a common Drawings account), will be debited to partners equally or in profit sharing ratio?