Question

What would be the journal entry of when excess capital was withdrawn by the partner?

Options

• Partners' Capital A/c Dr To Cash/Bank A/c

• Cash/Bank A/c Dr To Partners' Capital A/c

• Both Partners' Capital A/c Dr To Cash/Bank A/c and Cash/Bank A/c Dr To Partners' Capital A/c.

• None of these

Answer 1

Partners' Capital A/c Dr To Cash/Bank A/c

Explanation:

The surviving partners may opt to change their capital contributions in their profit sharing ratio if one of the partners retires or dies. Unless otherwise specified, the aggregate of the balances in the capitals of continuing partners may be taken as the whole capital of the new firm.