Debit Partner's Drawings, Credit Profit and Loss Account
The correct entry is to debit the Profit and Loss Account and credit the Partner's Capital Accounts.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the journal entry to record the distribution of profits to partners?
Solution: The correct entry is to debit the Profit and Loss Account and credit the Partner's Capital Accounts.
Steps: 5
Step 1: Identify the total profits that need to be distributed to the partners.
Step 2: Determine how much profit each partner will receive based on their agreement.
Step 3: Open your accounting journal to record the entry.
Step 4: Write a debit entry for the total amount of profits in the Profit and Loss Account. This reduces the profit available.
Step 5: Write a credit entry for each partner's share of the profits in their respective Partner's Capital Accounts. This increases their capital balance.
