Question

Angela and Agatha are partners in Double A Partners. When they withdraw cash for personal use, how should that be recorded in the accounting records?

a) Debit Drawings; Credit Cash
b) Debit Cash; Credit Capital
c) Debit Salary Expense; Credit Cash
d) Debit Retained Earnings; Credit Cash

Answer 1

Withdrawals by partners for personal use should be recorded as a debit to the Drawings account and a credit to the Cash account to reflect the decrease in the business's cash and equity.

Step-by-step explanation:

When Angela and Agatha, partners in Double A Partners, withdraw cash for personal use, it should be recorded as a debit to the Drawings account and a credit to the Cash account. The correct journal entry for this transaction is: a) Debit Drawings; Credit Cash. This reflects the reduction in both the business cash and the partners' equity within the company. Since the withdrawal is for personal use, it is not treated as an expense but rather as a return of equity to the partners.