When a partner withdraws cash for personal use from a firm with fluctuating capital accounts, which account is normally debited?
Correct answer: C. Partner's Capital Account
- A. Cash Account
- B. Drawings Account
- C. Partner's Capital Account
- D. Profit and Loss Account
Explanation
Under the fluctuating capital method, drawings are recorded directly in the partner's capital account by a debit. Cash is credited because the firm pays out cash, while profit and loss is not affected by personal withdrawals.
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About Partnership Accounts
Partnership accounts cover the partnership agreement, capital and current accounts, profit and loss appropriation, salaries, interest on capital, interest on drawings and profit-sharing ratios. They also address changes in partnership, including admission, retirement, goodwill, revaluation, dissolution and the settlement of partners’ balances.
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