Introduction
In this article we will learn about the adjustment for 'Drawings by partners' in partnership accounts.
Please note that the adjustment will be done in a similar manner whether you are doing admission, retirement, death or change in profit ratio question. You need not understand the adjustments separately for these chapters.
What are drawings in partnership
Let's first understand the meaning of drawings by the partner from partnership firm.
- It means withdrawal of assets by partners from the firm for personal use. Usually drawing are made in the form of cash. But drawings can be made in the form of any other assets as well. Partners can withdraw
- cash,
- bank,
- machinery,
- building,
- stock,
- vehicles,
- or any other asset as drawings
When a partner withdraws cash from business then it is called drawings in cash. When a partner withdraws from firm an asset other than cash then it is called drawings in kind.
Drawings by partners can be made by how many partners?
Next we come to how many partners can make drawings from firm?
There is no restriction on how many partners can withdraw. One or more partners can withdraw assets from the firm simultaneously.
Drawings by partners adjustment in question
Now we have understood the meaning of drawings. Now let's see how 'Partner drawings' adjustments are given in the question.
- B, C and D are Partners. B withdraws Rs 20000 in cash from the firm. This is a question of drawings in cash.
- B, C and D are Partners. Furniture of Rs 30000 were to be taken over by B, C and D equally. This is a question of drawings in kind.
Drawings by partners - Understanding the adjustment
Next we come to understanding the adjustment. When drawings are made by a partner, then the assets of the firm will decrease. It is due to partner's have taken the firm's asset for personal use.
Secondly, since the partner has withdrawn assets from the firm, so the capital of the respective partner in the partnership firm will decrease.
Example of drawings by partners in cash.
Suppose B withdraws Rs 20000 cash from the firm, then the assets of the firm will reduce by Rs 20000. The capital of B will reduce by Rs 20000. The capital of other partners will remain the same.
Example of Drawings by partners in kind
Suppose Furniture of Rs 30000 to be taken over by each partner B, C and D equally. It means each partner withdraws furniture of Rs 10000 from the firm. The furniture which is an asset for the firm will reduce by Rs 30000. The capital of partners B, C and D will reduce by Rs 10000 each .
Drawings by partner journal entry
First, let's understand the journal entry for drawings by partner in cash .
Drawings by partner in Cash
- B's Capital A/c Dr.. 20000
- To Cash A/c 20000
The capital of the partner B will decrease so his capital account gets debited by Rs 20000. The assets of the firm which is cash in this case also decrease, so cash account gets credited by Rs 20000.
Next, we come to journal entry for drawings by partner in kind.
Drawings by partner in kind
- B's Capital A/c Dr.. 10000
- C's Capital A/c Dr.. 10000
- D's Capital A/c Dr.. 10000
- To Furniture A/c 30000
The capital of each partner, B, C and D will decrease by Rs 10000 each. Each partner capital account gets debited by Rs 10000. Furniture which is an asset for the firm, will reduce by Rs 30000. Furniture account gets credited by Rs 30000.
Drawings by partner in Revaluation Account
| Particulars | Amount | Particulars | Amount |
There will be no impact in revaluation account due to this adjustment. This is because we are not revaluing any assets or liabilities in this adjustment.
Drawings by partner in Partner Capital A/c
First we will discuss the example one, of drawings in cash. In this case B's capital is decreasing so we will write on the debit side of his capital account. We will write 'To Cash Account' Rs 20000 since cash is withdrawn.
Drawings in Cash
| Particulars | B | C | D | Particulars | B | C | D |
| To Cash | 20000 | ||||||
Next we will discuss the example two, of drawings in kind. In this case B, C and D capital is decreasing so we will write on the debit side of their capital accounts. We will write 'To Furniture Account' Rs 10000 in each partner column since furniture is withdrawn.
Drawings in Kind
| Particulars | B | C | D | Particulars | B | C | D |
| To Furniture | 10000 | 10000 | 10000 | ||||
There will be no entry on the credit side of partner capital account
Drawings by partner in Balance Sheet
Drawings in Cash
| Liabilities | Amount | Assets | Amount |
| Cash | -20000 | ||
The partnership firm's assets are decreasing. So impact will be on assets side. The amount of cash will decrease by Rs 20000.
There will be no impact on the liabilities side of the balance sheet.
Drawings in Kind
| Liabilities | Amount | Assets | Amount |
| Furniture | -30000 | ||
The partnership firm's assets are decreasing. So impact again will be on assets side. The amount of furniture will decrease by Rs 30000.
There will be no impact on the liabilities side of the balance sheet.
Finally
Here is the summary of the whole adjustment.
That's all for this adjustment. Please go through below links for more partnership accounts adjustments on reconstitution.
