Which of the following entry shows withdrawal of excess capital by partner's?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Partner's capital A/c is debited and Cash/Bank A/c is credited.
The journal entry 'Partner's capital A/c is debited and Cash/Bank A/c' is credited shows withdrawal of excess capital by partner's.
When a partner withdraws excess capital, it means capital is being reduced and cash is going out of the business. So the journal entry is:
Partner’s Capital A/c Dr. ₹XXX
To Cash/Bank A/c ₹XXX
Partner's Capital A/c is debited → to reduce the partner's capital.
Cash/Bank A/c is credited → because money is going out.