BIM45710 - Specific deductions: interest: overdrawn capital account: no adjustment for revaluations

When examining the proprietor's capital account transactions you should draw a distinction between accumulated realised profits, both capital and revenue, on which a proprietor is free to draw and unrealised profits or losses. Unrealised profits do not represent a cash item and may never be realised. They cannot affect the level of bank borrowings. You should disregard unrealised profits or losses in considering whether a proprietor's account is overdrawn.

A revaluation of business assets (for example property or goodwill) in advance of disposal is an example of unrealised profit and should therefore be disregarded.