Dear Sir,
Kindly comment on the below case.
A Proprietary concern with "X" as capital in the balance sheet and assets in the name of the concern was converted into a Partnership Firm, with the induction of a working partner who was heading the main operations of the concern for the last 11 years. All the assets were got into the books of accounts of the Partnership Firm.
The first legal document signed by the partners of the firm was the Partnership Deed. Terms and conditions were drawn out in the Deed and was signed by both the Partners. The Ex-Proprietor - say A - turned partner declared X/3 as his capital in the Partnership Deed, while taking a major share in the profit / loss of the firm. The other partner agreed to the terms as the capital of A was reduced, assets were got into the firm in the firms name and being working partner for 11 years agreed for a lesser share in the profit / loss of the firm.
The Balance Sheet of the Firm continued to show the X as the partner's capital for all income tax and bank purpose. Now in the case of dissolution of the Partnership firm, what will be the captial of the partner A who has agreed for X/3 in the partnership deed.
Does the capital declared in the Partnership Deed stands good at the time of dissolution of the Partnership firm or does the Capital as per the Balance Sheet.
Kindly advice.
Regds.
Chandran Baloo
CAclubindia
