I received some very helpful advice on this forum a year or so ago when my client (director of a small limited company providing consultancy services) had decided to go into business with a friend. The route they decided upon was for the limited company to become a partner of the partnership, with the friend being the other partner.
The accounts for the most recent year end of the limited company show the various pre-trading costs that the limited company has paid for (its 50% share of the costs) as a debtor under "investment in partnership".
It now turns out that the partnership was never set up (my client sent all of the forms off to HMRC but they didn't respond). The other partner now no longer wishes to go ahead with the partnership. My client does not wish to take it any further on her own as she does not have the expertise.
My query is how to reflect this state of affairs in the company accounts. Should I debit the profit and loss account (share of partnership losses?) by the amount of the initial investment, and credit the investment in partnership?
I do of course plan to check with HMRC that the partnership has not actually been set up and my client is just unaware of this, to ensure that there are no reporting obligations for the partnership.