Question: What is the effect of a partner\'s withdrawal on the partnership\'s capital accounts?
Options:
Increase in capital accounts
Decrease in capital accounts
No effect on capital accounts
Increase in liabilities
Correct Answer: Decrease in capital accounts
Solution:
A partner\'s withdrawal results in a decrease in the capital accounts of the partnership.
What is the effect of a partner's withdrawal on the partnership's capital accoun
Practice Questions
Q1
What is the effect of a partner's withdrawal on the partnership's capital accounts?
Increase in capital accounts
Decrease in capital accounts
No effect on capital accounts
Increase in liabilities
Questions & Step-by-Step Solutions
What is the effect of a partner's withdrawal on the partnership's capital accounts?
Step 1: Understand that a partnership has capital accounts for each partner, which show how much money or value each partner has invested in the business.
Step 2: When a partner decides to withdraw from the partnership, they take out their share of the capital.
Step 3: This withdrawal means that the total amount of money or value in the partnership decreases.
Step 4: As a result, the capital account of the withdrawing partner is reduced by the amount they take out.
Step 5: The overall capital accounts of the partnership also decrease because one partner's share is no longer part of the business.
No concepts available.
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