treatment of Firm Loss

AS 513 views 3 replies

If a firm incurred loss, how it will be treated in that F.Y. and next F. Y.? weather it will appeared as un absorped loss or adjusted to Partners' Capital ?

Replies (3)

Dear Sanjay,

The layout of the balance sheet and profit & loss account of a partnership firm is not governed by any statute.The presentation of loss which you are talking about is as per The Companies Act, 1956 which is applicable only to companies.

 

In case of firm, the loss is adjusted in partner's capital account in that financial year itself.So the question of treatment of loss in the next financial year does not arise.

 

Regards,

Fatema.

 

IN CASE OF FIRM LOSS , IN INCOME TAX RETURN, IT SHOULD BE CARRIED FORWARD TO NEXT YEAR IN RETURNS AND SET OFF WITH NEXT YEAR PROFIT IN NEXT YEAR RETURN.

IN BOOKS , YOU HAVE TWO OPTION, FIRST ONE IS CARRIED FORWARD LOSS AS PROFIT & LOSS A/C IN ASSET SIDE OF BALANCE SHEET IN YEAR OF LOSS, AND SET OFF WITH PROFIT OF NEXT YEAR AND DISTRIBUTED NET PROFIT AFTER LOSS TO PARTNERS CAPTIAL A/C IN NEXT YEAR.

SECOND OPTION, YOU CAN T/F LOSS OF FIRM IN SAME FY IN PARTNER CAPTIAL A/C , BUT IN RETURN YOU HAVE TO C/F AS IT AND SET OFF IN NEXT YEAR RETURN.

 

agreed...


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