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What is its journal entry - Out of creditors ,a sum of 10,000 is due to A(partner) which will be transferred to his capital.?
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What is its journal entry - Out of creditors ,a sum of 10,000 is due t...
Journal Entry for Transfer of Creditors to Capital


Background Information

Out of creditors, a sum of 10,000 is due to A (partner). The company has decided to transfer this amount to A's capital account.


Journal Entry


  • Debit A's Capital Account: 10,000

  • Credit Creditors Account: 10,000



Explanation

When a creditor amount is transferred to a partner's capital account, it means that the partner has invested that amount in the company. In this case, A is owed 10,000 by the company, and instead of paying it back to A, the company has decided to transfer the amount to A's capital account. This means that A is now a part-owner of the company and has invested 10,000 in it.


The journal entry reflects this transaction by debiting A's capital account and crediting the creditors account. The amount of 10,000 is moved from the liability side of the balance sheet (creditors account) to the equity side (A's capital account).


It's important to note that transferring creditors to a partner's capital account should only be done after careful consideration and agreement between the partners. It can have implications on the company's financial ratios and affect the distribution of profits among partners.
Community Answer
What is its journal entry - Out of creditors ,a sum of 10,000 is due t...
A's capital A/c Dr. 10000
to capital A/c 10000
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What is its journal entry - Out of creditors ,a sum of 10,000 is due to A(partner) which will be transferred to his capital.?
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