Which of the following statements is true about partnership accounting?
A)A particular partner's capital account is debited when a withdrawal takes place by that partner.
B)Through the closing entry process for a partnership,a positive net income results in an increase in overall partner capital.
C)The total of the drawing account balances are subtracted to arrive at the net income to allocate to the partners.
D)The partner's drawing account is closed to retained earnings at the end of the period.

Question

Quizplus · Accepted Answer

Through the closing entry process for a partnership, a positive net income results in an increase in overall partner capital. This is because the net income is allocated to the individual partner's capital accounts, increasing their balances and therefore increasing the overall partnership capital. The other statements are incorrect: A particular partner's capital account is credited when a withdrawal takes place (not debited) and the partner's drawing account is closed to their capital account (not retained earnings). The total of the drawing account balances cannot be subtracted to arrive at the net income as the drawing accounts are separate from the income and expense accounts.

Which of the Following Statements Is True About Partnership Accounting