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Query asked by surbhi. on February 13, 2022

Re: Treatment of debit balance in partners capital account.

Partner had debit balance in partners capital account. He left the firm without paying overdrawn amount to the firm. Can partnership firm claim this as business loss or unrecoverable loan and write off the said amount in profit & loss account.

: At the time of retirement, a deed of retirement would have been executed, according to which the partner’s capital account would have been fully and finally settled. Therefore, loss on settlement, if any, would be a capital loss.   



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