Proprietorship to Partnership firm

[Raman Singla]

During Conversion of Proprietorship to Partnership firm... with assets and liability except which are doubtful to the new partnership firm(to the new partner) belongs to proprietorship.....Can we leave those doubtful (Unsecured Loan+Loan Advances,Sundry Creditors related to Proprietor) ??....What will be treatment of those Unsecured Loan+Loan Advances and Sundry Creditors in the balance sheet of Proprietorship ???

[DR.MARIAPPAN GOVINDARAJAN]

It depends upon the agreement made between the parties to the conversion.

AI Summary

Conversion of proprietorship to partnership: treatment of doubtful unsecured loans and creditors depends on parties' agreement. Conversion of a proprietorship into a partnership transfers the proprietorship's assets and liabilities to the new partnership; treatment of doubtful liabilities such as unsecured loans, loan advances and sundry creditors depends on the agreement between the parties and that agreement governs how those items are recorded or settled in the proprietorship's balance sheet and in the partnership accounts.