Withdrawal of Funds from Partnership

During the course of partnership business, any partner may ask for withdrawal of funds or other assets. Such withdrawal is recorded into the drawing account of each partner. Just like the sole proprietors accounting, the drawing account is maintained for each partner in the accounting system.

Example Question

Adam, Boon and Chelsey are the three partners in the partnership firm ABC. In the operations of the business, following drawing happen from the business:

Adam withdrew furniture costing $70,000 and cash $50,000.

Boon withdrew vehicle $120,000 and cash $30,000.

Chelsey withdrew inventory $80,000 and cash $60,000.

Required:

Journalize the above transactions.

Close the drawing account of each partner in the partnership firm.

Solution

Description Debit Credit
Adam's drawing  120,000   
   Cash    70,000 
   Furniture    50,000 
     
Boon's drawing   150,000  
   Cash    30,000 
   Vehicle    120,000 
     
Chelsey's drawing  140,000  
   Inventory   80,000 
   Cash   60,000 
     
Journal Entry toclose drawing accounts:    
     
Adam's capital 120,000  
Boon's capital 150,000  
Chelsey's capital 140,000  
   Adam's drawing   120,000
   Boon's drawing    150,000 
   Chelsey's drawing   140,000

 

Contents
Financial Ratios Accounting Cycle Accounting Principles Financial Accounting Basics Financial Statements Reporting Bad Debts Current Assets Long-term Assets Voucher System Partnership Partnership Formation Withdrawal of Funds from Partnership Distribution of Profit or Loss in Partnership Revaluation of Assets in Partnership Admission of Partner(s) Retirement of a Partner in a Partnership Dissolution of Partnership - Partnership Liquidation Partnership accounting multiple choice questions and answers Pdf Depreciation Work Sheet - 10 Column Work Sheet Difference Between Reserve and Fund Accounting for Leases Capital reduction and reconstruction Absorption of Company Amalgamation Accounting for Installment Sales Basis of Recording Profit and Loss Branch Accounting Construction Contracts Revenue Recognition Accounting for Groups Financial Analysis Events After the Balance Sheet Date Deferred Tax Cost Accounting Activity Based Costing (ABC) Throughput Accounting Relevant Cost Break Even Analysis Standard Costing Inventory Management Payroll Accounting Royalty Accounting Statistics Master Budget Salary Income Microsoft Excel Tutorial Other Topics Share or Stock Valuation Model Financial Management Topics Kinds of Endorsement Letter of Credit, Kinds and Its Advantages/ Utilities Modern Functions of a Commercial Banks Difference Between Secured And Unsecured Loan Excel conditional formatting red if negative green if positive How to Remove Extra Spaces in Excel Result Card or Result Sheet Creation Using Excel Basic Accounting MCQS Multiple Choice Questions