Query:
A partnership firm has given a Immovable property gift to 2 of its partners. A gift deed is made (with stamp duty value 30Lakh). But the cost of the property in the firm's Balance sheet is only Rs 2Lakh. The entry passed is
partner's capital a/c 1...Dr Rs 100000
partner's capital a/c 2 ...Dr Rs 100000
To Property account. ..........Cr Rs 200000
If we pass the entry as above the capitals of the partners will be reduced. Since it is a gift for no consideration at all, why should the capital balances be reduced
Answer:
As the firm has made gift deed, the entry should be as mentioned.
Further as per simple accounting concept, firm and individual partners are different entity.And this is loss to firm as it has transferred the property as gift.
And loss will be ultimately debited in partners capital account. While computing the Income tax, if it would have been debited in p&l, the deduction of the same (Loss) could have not be claimed for income tax purposes. So, the effect would be the same in accounts though (Net P&L debit to capital A/c)
While filing return of income, the same should be treated as capital gain in the return of firm.
A partnership firm has given a Immovable property gift to 2 of its partners. A gift deed is made (with stamp duty value 30Lakh). But the cost of the property in the firm's Balance sheet is only Rs 2Lakh. The entry passed is
partner's capital a/c 1...Dr Rs 100000
partner's capital a/c 2 ...Dr Rs 100000
To Property account. ..........Cr Rs 200000
If we pass the entry as above the capitals of the partners will be reduced. Since it is a gift for no consideration at all, why should the capital balances be reduced
Answer:
As the firm has made gift deed, the entry should be as mentioned.
Further as per simple accounting concept, firm and individual partners are different entity.And this is loss to firm as it has transferred the property as gift.
And loss will be ultimately debited in partners capital account. While computing the Income tax, if it would have been debited in p&l, the deduction of the same (Loss) could have not be claimed for income tax purposes. So, the effect would be the same in accounts though (Net P&L debit to capital A/c)
While filing return of income, the same should be treated as capital gain in the return of firm.
Entry for property Transferred as gift by Partnership Firm ?