Question

Wright, Bell, and Edison are partners and share income in a 2:5:3 ratio. The partnership's capital balances are as follows: Wright, $33,000, Bell $27,000 and Edison $40,000. Edison decides to withdraw from the partnership, and the partners agree not to revalue the assets upon Edison's retirement. The journal entry to record Edison's June 1 withdrawal from the partnership if Edison is paid $40,000 for his equity is:

Answer 1

Debit Edison, capital $40,000 ; Credit Whitney,capital $40,000

Explanation: There are three golden rules for accountancy out of which for this provided question, the accounting rule is applied as follows:

Debit the receiver and credit the giver.

The reason why this entry is applicable  because capital account is personal account and company's capital account  is making the payment to Edison.