Capital Account
Capital account of each partner represents his equity in the partnership.
Capital account of a partner is increased in the following situations:
- The owner made additional investments during the year.
- The owner received guaranteed payments from the partnership.
- Partnership earned profits, and a share of profits was allocated to the partner.
- The increase in the capital will record in credit side of the capital account.
Salary and interest allowances are guaranteed payments, discussed later.
Capital account of a partner is decreased when the owner makes withdrawals of cash or property
Read more about this topic: Partnership Accounting
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