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What is the journal entry to record the profit sharing among partners?
What is the journal entry to record the profit sharing among partners?
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What is the journal entry to record the profit sharing among partners?
Debit Profit and Loss Account, Credit Partner's Capital Accounts
Debit Partner's Capital Accounts, Credit Profit and Loss Account
Debit Drawings Account, Credit Profit and Loss Account
Debit Profit and Loss Appropriation Account, Credit Partner's Capital Accounts
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The correct entry is to debit the Profit and Loss Account and credit the Partner's Capital Accounts to distribute profits.
Questions & Step-by-step Solutions
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Q: What is the journal entry to record the profit sharing among partners?
Solution:
The correct entry is to debit the Profit and Loss Account and credit the Partner's Capital Accounts to distribute profits.
Steps: 6
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Step 1: Determine the total profit that needs to be shared among the partners.
Step 2: Identify the profit-sharing ratio for each partner (how much each partner gets).
Step 3: Calculate the amount of profit each partner will receive based on the profit-sharing ratio.
Step 4: Open your accounting journal to record the entry.
Step 5: Debit the Profit and Loss Account with the total profit amount. This shows that the profit is being distributed.
Step 6: Credit each Partner's Capital Account with their respective share of the profit. This increases their capital in the business.
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