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Financial Accounting · Accounting of Limited Liability Partnership

Accounting and Financial Statements of LLP

Updated 10 October 2026 · Fact-checked

An LLP must keep proper double-entry books, prepare a Statement of Account and Solvency within six months of year-end, sign it by designated partners, file it with the Registrar, and get accounts audited as per the rules. Partners' capital and current accounts show contributions and profit shares separately.

Understand Accounting and Financial Statements of LLP

A Limited Liability Partnership is a body with its own legal identity, so its accounts must be kept in a formal way. Section 34 of the LLP Act, 2008 sets the base rules. The LLP must keep proper books of account for each year of its existence, on cash basis or accrual basis, and always on the double entry system. The books are kept at the registered office for the prescribed period.

The exact books and the period of keeping them are not fixed in the Act. They are left to the rules made by the Central Government under Section 79. The same applies to the form of the statement, the time and fee of filing, and the audit rules. So in answers, say 'as prescribed' for these details.

Within six months from the end of each financial year, the LLP must prepare a Statement of Account and Solvency as at the last day of that year. It is signed by the designated partners. It must then be filed with the Registrar within the prescribed time, in the prescribed form, manner and fee. The statement is the LLP's main yearly report, and it carries a solvency declaration. Section 36 makes the filed statement open to inspection by any person on payment of the prescribed fee.

Accounts are audited in accordance with the prescribed rules. The Central Government may exempt a class or classes of LLPs from the audit requirement by notification. Under Section 34A, the Central Government may, in consultation with the National Financial Reporting Authority, prescribe accounting and auditing standards, as recommended by ICAI, for a class or classes of LLPs.

For partners' accounts, a common practice is to keep a capital account for the fixed contribution and a current account for profit share, remuneration, interest and drawings. The capital account changes only when the LLP agreement allows it. The current account moves every year. The Act leaves the manner of accounting and disclosure of the monetary value of a partner's contribution to the rules. Profit share and remuneration follow the LLP agreement.

Key rules to remember

Books of account (Section 34(1))
Proper books + double entry + cash or accrual basis + kept at registered office
The form of books and the period of keeping them are as prescribed.
Statement of Account and Solvency (Section 34(2))
Prepare within 6 months from end of financial year; signed by designated partners
It is prepared as at the last day of the financial year.
Filing (Section 34(3))
File with Registrar within the prescribed time, in the prescribed form, manner and fee
Filing is done every year. Form number and due date come from the rules, not the Act.
Audit (Section 34(4))
Accounts audited as per prescribed rules; Central Government may exempt classes of LLPs
Do not quote a turnover or contribution limit as being in the Act. The Act gives none.
Penalty for late filing (Section 34(5))
₹100 per day of default; maximum ₹1,00,000 for the LLP and ₹50,000 for each designated partner
Applies to failure to file the statement under Section 34(3).
Fine for default under Section 34(1), (2), (4)
LLP: ₹25,000 to ₹5,00,000; each designated partner: ₹10,000 to ₹1,00,000
Applies to failure to keep books, prepare the statement or get audit done.
Winding up for default (Section 64(e))
Default in filing Statement of Account and Solvency or annual return for any 5 consecutive financial years
The Tribunal may then wind up the LLP.
Partner's current account
Closing balance = Opening + Share of profit + Remuneration + Interest on capital − Drawings − Interest on drawings (if charged) − Share of loss
Items depend on the LLP agreement. Show a debit balance as a deduction.

How to solve Accounting and Financial Statements of LLP questions

Use this method for theory questions on LLP accounts and for numerical questions on partners' accounts.

  1. 1Read what is asked: a legal requirement (books, statement, filing, audit, penalty) or a numerical question on partners' accounts.
  2. 2For legal questions, state the rule in plain words with the section: Section 34 for books, statement, filing and audit; Section 34A for standards.
  3. 3Add what is left to the rules: form of books, period of keeping, form and due date of filing, audit rules. Say 'as prescribed'.
  4. 4For penalties, match the default to the sub-section. Late filing is Section 34(5). Failure on books, statement or audit is Section 34(6).
  5. 5For numericals, check the LLP agreement terms first: interest on capital, remuneration, profit ratio, interest on drawings.
  6. 6Compute each item in a working note, then post to each partner's current account.
  7. 7Show the capital accounts and current accounts separately in the Balance Sheet, with debit balances clearly marked.
  8. 8End with a one-line conclusion, such as total of partners' funds or the penalty payable.

Quickest way: Section 34 checklist

When to use it: Use for MCQs and short theory questions on LLP books, statement, filing, audit and penalties.

  1. Think: books, 6 months, file, audit.
  2. Books: double entry, cash or accrual, registered office.
  3. Statement: within 6 months, signed by designated partners.
  4. Late filing: ₹100 per day. Caps: ₹1,00,000 for the LLP and ₹50,000 for each designated partner.
  5. Any other Section 34 default: fine ₹25,000 to ₹5,00,000 for the LLP.
  6. Five straight years of non-filing: Tribunal may wind up under Section 64(e).

Common mistakes in Accounting and Financial Statements of LLP

  • Writing that the LLP Act fixes a turnover or contribution limit for audit.

    Students mix rule-based thresholds with the Act itself.

    Fix: Say the audit is under the prescribed rules and the Central Government may exempt classes of LLPs. Quote a limit only if the question gives it.

  • Saying the Statement of Account and Solvency is due within the year-end plus any time.

    Confusing preparation with filing.

    Fix: Preparation is within six months of year-end. Filing is within the prescribed time.

  • Applying the ₹100 per day penalty to all defaults.

    Section 34(5) and 34(6) look alike.

    Fix: ₹100 per day is for failing to file. Failing to keep books, prepare the statement or get audit done attracts fines under Section 34(6).

  • Forgetting the maximum cap in the daily penalty.

    Students compute days × ₹100 without checking limits.

    Fix: Cap the LLP at ₹1,00,000 and each designated partner at ₹50,000.

  • Putting drawings and profit share in the capital account.

    Treating LLP like a firm with a fluctuating capital account.

    Fix: Use the current account for yearly movements unless the question says the capital is fluctuating.

  • Saying any partner signs the Statement of Account and Solvency.

    Ignoring the role of designated partners.

    Fix: Section 34(2) requires signature by the designated partners.

Worked examples

Example 1

An LLP with a financial year ending 31 March 2027 files its Statement of Account and Solvency 60 days late. Compute the penalty on the LLP and on each of its two designated partners under Section 34(5).

Show the solution
  1. The default is failure to file under Section 34(3), so Section 34(5) applies.
  2. Penalty = ₹100 × 60 days = ₹6,000.
  3. Check caps: ₹6,000 is below ₹1,00,000 for the LLP and below ₹50,000 for each designated partner.
  4. So the LLP is liable to ₹6,000 and each designated partner is liable to ₹6,000.

Answer: ₹6,000 on the LLP and ₹6,000 on each designated partner.

Example 2

Mehta & Rao LLP has two partners, A and B, sharing profits 3:2. Opening current accounts: A ₹20,000 (Cr), B ₹10,000 (Cr). Capitals: A ₹5,00,000, B ₹3,00,000. The agreement gives 10% p.a. interest on capital and a remuneration of ₹60,000 to A. Net profit before these items is ₹4,00,000. Drawings: A ₹50,000, B ₹30,000. Prepare the partners' current accounts closing balances.

Show the solution
  1. Interest on capital: A = 10% of ₹5,00,000 = ₹50,000. B = 10% of ₹3,00,000 = ₹30,000. Total ₹80,000.
  2. Remuneration to A = ₹60,000.
  3. Profit available to share = ₹4,00,000 − ₹80,000 − ₹60,000 = ₹2,60,000.
  4. Share in 3:2: A = ₹1,56,000. B = ₹1,04,000.
  5. A: ₹20,000 + ₹50,000 + ₹60,000 + ₹1,56,000 − ₹50,000 = ₹2,36,000 (Cr).
  6. B: ₹10,000 + ₹30,000 + ₹1,04,000 − ₹30,000 = ₹1,14,000 (Cr).

Answer: A's current account closes at ₹2,36,000 (Cr) and B's at ₹1,14,000 (Cr).

Exam tips

  • For theory, quote Section 34 sub-section by sub-section. It earns clean step marks.
  • Always write 'as prescribed' for form, period of keeping books, filing time and audit rules. Never invent a form number or limit.
  • In MCQs, watch the numbers: six months, ₹100 per day, ₹1,00,000, ₹50,000, five consecutive years.
  • In numericals, read the LLP agreement terms first. Without them, profit is shared equally unless the question says otherwise.
  • Show working notes for interest and remuneration before the current accounts.

Practice questions from Accounting of Limited Liability Partnership

Accounting and Financial Statements of LLP in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Accounting and Financial Statements of LLP: frequently asked questions

What is the Statement of Account and Solvency of an LLP?

It is a yearly statement prepared as at the last day of the financial year, in the prescribed form. Designated partners sign it, and it is filed with the Registrar. Section 34 requires it.

Within what time must an LLP prepare the statement?

Within six months from the end of the financial year. The time for filing it with the Registrar is as prescribed in the rules.

What is the penalty for not filing the statement?

Under Section 34(5), the LLP and its designated partners are liable to ₹100 per day of default. The maximum is ₹1,00,000 for the LLP and ₹50,000 for each designated partner.

Is an audit compulsory for every LLP?

Section 34(4) says accounts are audited as per the prescribed rules. The Central Government may exempt classes of LLPs by notification. The exact conditions are in the rules, not in the Act.

Can an LLP be wound up for not filing accounts?

Yes. Under Section 64(e), the Tribunal may wind up an LLP that defaulted in filing the Statement of Account and Solvency or annual return for any five consecutive financial years.