NEGATIVE BALANCE SHOWN IN PARTNERS CAPITAL ACCOUNT

Negative balance shown in partners capital account end of the year.
opening of the year partners capital was 22lac and he drawing 28 lac so 6 lac negative balance shown.
If I transfer this balance to current account (asset), is it mandatory to return the amount 6 lac to close current account next year?
Replies (3)
Quick Summary
This discussion addresses a scenario where a partner's capital account shows a negative balance at year-end due to drawings exceeding the initial capital. The recommended solution is to adjust this through the partner's current account, which can legitimately hold a negative balance. This approach aligns with standard partnership accounting practices where capital accounts reflect fixed contributions and current accounts manage profit/loss sharing and drawings.

You should adjust through partners current account which can be negative.

Partners Capital Account ( As per partnership deed)

Partners current account ( Profit / loss sharing and drawings)
Thank you sir
👍🏻👍🏻

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Follow