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In question case 5 ioc=24000 But profit=15000 so why we treat it in p&l account Suggest your answer with reason
Answers (7)
Aswin Chandar
Hey there, Usually if there is a loss we don't provide for IOC but if the deed specifically states we should provide IOC even if there is loss, then we should debit that to P&L appropriation because the partnership deed says so.
But this is showing that ioc is debited in p&l account not in appropriation account
Thread Starter
Nakul DixitBut this is showing that ioc is debited in p&l account not in appropriation account
oh Yes I mistakenly said P&L appropriation. P&L should be debited because when the interest is payable irrespective of whether the firm earns profit or not, it becomes a charge against profits of the firm i.e., similar to interest on loan.
Aswin Chandar
oh Yes I mistakenly said P&L appropriation. P&L should be debited because when the interest is payable irrespective of whether the firm earns profit or not, it becomes a charge against profits of the firm i.e., similar to interest on loan.
So finally 24000-15000=9000 is treated as loss transfer to capital account Am right
Thread Starter
Nakul DixitSo finally 24000-15000=9000 is treated as loss transfer to capital account Am right
Yes. If profits are even less than debit to capital acc will be even more.
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