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What is the effect of a partner withdrawing from a partnership on the capital ac
What is the effect of a partner withdrawing from a partnership on the capital accounts?
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Practice Questions
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Q1
What is the effect of a partner withdrawing from a partnership on the capital accounts?
Increase in total capital
Decrease in total capital
No effect on total capital
Increase in liabilities
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When a partner withdraws, it typically results in a decrease in total capital as their capital account is settled.
Questions & Step-by-step Solutions
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Q
Q: What is the effect of a partner withdrawing from a partnership on the capital accounts?
Solution:
When a partner withdraws, it typically results in a decrease in total capital as their capital account is settled.
Steps: 5
Show Steps
Step 1: Understand that a partnership has capital accounts for each partner, which show how much money or assets each partner has invested.
Step 2: When a partner decides to leave the partnership, they will withdraw their share of the capital.
Step 3: Calculate the amount in the withdrawing partner's capital account to determine how much they will take out.
Step 4: Reduce the total capital of the partnership by the amount withdrawn by the partner.
Step 5: Update the capital accounts of the remaining partners if necessary, but the total capital of the partnership will decrease.
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