Funds introduced by proprietor in company account

A/c entries 642 views 7 replies

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

Replies (7)

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


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