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Unabsorbed depreciation-firm

Practise 708 views 1 replies

Kumar Gaurav

Going...to be C.A soon...

1624 Points Posted on 22 June 2013

Dear All

A) Partnership firm named ABC earns a profit of Rs. 15000/- in 2010-2011 before claiming depreciation Rs. 7,45000/-.

Treatment done in books:- Profit credited to partner's capital account equally in their profit sharing ratio and unabsorbed depreacation was carried forwarded to next year Rs. 745000/-.

B) Same Partnership firm named ABC earns a profit of Rs. 1,50,000/- in 2011-2012 before claiming depreciation Rs. 5,85000/-.

Treatment done in books:- Last year unabsorbed deprecaition for Rs. 745000+this year dep. for Rs. 585000/- less profit of Rs. 1,50,000/-=11,80,000/- (LOSS) shared equally in their profit sharing ratio by partners..

Please comment on above situations. is the treatment given in books is correct?????

Also, comment as firm partners does'nt want to share the loss (due to unabsorbed dep) from their capital account by not adjusting the same and want to carry forward till next year

Thanks

Gaurav

Replies (1)

Giridhar S Karandikar

Team Lead

7558 Points Posted on 24 June 2013

the treatment given by the firm in both the cases is different. In first case profit is starightaway credited to partners capital account whihc is totally wrong. The loss i.e. the unabsorbed depreciation after deducting the profit beofre charing depreciation shud be trasnferred to the capital accounts of the partners. I don't think that the partners are entitled to not to bear the loss on account of unabsorbed depreciation.