Final answer:
The journal entry for contributions to a partnership includes debiting each contributed asset to its respective account and crediting the partner's capital account for the total value contributed, thus reflecting the partner's new equity in the business.
Step-by-step explanation:
The journal entry for contributions to a partnership involves recording the assets and possibly liabilities that a new or existing partner contributes to the business. Typically, each asset contributed by the partner is debited to its respective account, and the partner's capital account is credited, representing their ownership stake in the partnership.
For example, if a partner contributes cash and equipment to the partnership, the journal entry would be:
- Debit Cash account (for the amount of cash contributed)
- Debit Equipment account (for the fair market value of the equipment contributed)
- Credit Partner's Capital account (for the total value contributed)
This reflects an increase in the partnership's assets and an increase in the partner's equity in the partnership. Any liabilities that are assumed by the partnership as part of the contribution would be credited as well.