Give relevant Journal entries in the books of a firt when is converted into joint stock company.
Answers
The entries could be separated as illustrated or it could be combined into one entry with a debit to cash for $125,000 ($100,000 from Sam and $25,000 from Ron) and the other debits and credits remaining as illustrated. Either way is acceptable. Since the note will be paid by the partnership, it is recorded as a liability for the partnership and reduces the capital balance of Ron Rain.
The entries could be separated as illustrated or it could be combined into one entry with a debit to cash for $125,000 ($100,000 from Sam and $25,000 from Ron) and the other debits and credits remaining as illustrated. Either way is acceptable. Since the note will be paid by the partnership, it is recorded as a liability for the partnership and reduces the capital balance of Ron Rain.Partners can take money out of the business whenever they want. Partners are typically not considered employees of the company and may not get paychecks. When the partners take money out of the business, it is recorded in the Withdrawals or Drawing account. Remember, this is a contra-equity account since the owners are reducing the value of their ownership by taking money out of the company.