Negative capital

Dont show negative captial...introduce additional capital inthe form of cash

Yes Alok! That is no more an Investment. 

As per AS-13, AS-23 and ASI - 18 (Accounting Standard Interpretation), the entire item itself is to be removed from B/S

Accountant is not ready to change his accounts due to low cash balance. Also amount of Neg Capital is more than Rs. 2 lakhs so its not good to show additional cash capital

In Prop.sp Firm, The company and member is same person under Income Tax Act hence no separate legal entity of them. Loss of company is same as of Prop but traditionally we make two b/s for co. and Prop each and capital balance of co.'s b/s goes to Prop's personal b/s as Investment and also no AS shall be applicable in this regard. As u can understand that its a small firm hence no question arises of Free Reserve.( Co. doesnt has reserve). Now u said correct that Capital of co. will be shown in Prop.'s personal b/s and this is what i m asking that if its in negative then would i still right as negative investment?? or somewhere else in b/s. And if there will be no treatment of it then why??

Not to show the drawings in capital a/c

Thanks to all of you. Also to all of them who send me Private messages in this regard and Specially Ms. Sweta and Celiena. Have a great future ahead.

 

In case of Proprietor, the proprietor keeps on drawing the profit earned in the form of self-drawings. When self-drawings for the FY becomes more than capital invested, capital becomes negative. So you need to transfer the profit to the capital account. If capital is negative after transferring profit/loss, then it is a situation of bankruptcy, and loss has to be displayed in the personal return.

Hi Alok,

I also have same query. will you advice me what treatment you gave for the same.