Funds introduced by proprietor in company account

Can the proprietor of a company give a loan to his proprietorship company ? Please clarify . 

Replies (7)
Quick Summary
A proprietor cannot technically lend money to their own sole proprietorship company, as it's not a separate legal entity. Funds introduced should be treated as capital. According to the business entity concept in accounting, the business and owner are distinct for financial records. Therefore, any funds put in are a liability of the business to the owner, and withdrawals are drawings. While it might seem logical to show it as a loan, it's best practice to record it as capital, reflecting the reality of the owner's investment.

The legal status of a sole proprietorship can be defined as follows: It is not a separate legal entity from the business owner.

Ok thanks for the information .

A person cannot lend money to himself. So the same is neither possible in books of accounts.
The right way to introduce the funds in proprietorship is through capital only . You can withdraw it when the funds are available or business is in profits
There are certain Accounting Concepts
1) Business entity concept
2) Money Measurements Concept
3) Cost Concept .
Almost all Business entity have accepted Business Entity concept , wherein Business and Business owner are two different entities for accounting purpose , So anything invested in the Business , same is the Liability of the Business to pay back , similarly anything withdraw from Business will be treated as Drawings by the owner and payable to back the Business .
we have to follow accounting concept , one of them is Business Entity concept followed by also most all Business.

Proprietors capital is a liability in the business as well. But showing it as a loan might be correct from accounting standard view point but not logically. It's like choosing theory over practical approach.

Proprietor capital is just ledger only but actual funds will come in the form of Bank Balance or Cash and Cash equivalents..

Hope you know double entry concept

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
19 October 2026
Accountants/Articles (Freshers/Experienced)

ADY & CO.

New Delhi

Graduate (Any)

View Details
Company
07 October 2026
Senior Account Manager

Amplio Invest

Mumbai

M.Com

View Details
Company
08 October 2026
Account Executive

Elite Taxation

New Delhi

CA Foundation

View Details
Company
16 October 2026
CA article trainee

Zerdi & Co. Chartered Accountants

Pune

CA Inter

View Details
Company
24 October 2026
CA Industrial Trainee

Fytomax Nutrition Private Limited

Aurangabad

CA Inter

View Details
Company
ARTICLESHIP 22 October 2026
Articleship intern

Srinath Manikanta

Hyderabad

CA Inter

View Details
Company
12 October 2026
Chartered Accountant - Internal Audit

HKC | Chartered Accountants & Business Advisors

Ludhiana

CA

View Details
Company
05 October 2026
Senior Accountant

Vision IT Peripherals Pvt Ltd

Mumbai

B.Com

View Details