Question

***I want a different answer please, the wrong answer to this question is already given earlier.***

In a partnership, a partner can contribute an initial investment, have a drawing account, and have loans to the partnership. Describe the accounting and reporting implications of each of these partner transactions on the formation and reporting of the partnership. Is providing a loan to a partnership on the same level as the initial investment and ongoing profits and losses by a partner? Why or why not? Support your position with scholarly and peer-reviewed sources per the APA style of citation.

Answer 1

initial investment

		Debit	Credit
1.	Cash	$xxxxxx
	Partner's Capital		xxxx

A drawing account

	Debit	Credit
Partner's Capital	xxxx
Cash		xxxx
(To record cash withdrawn by owner or partner)

Loans to the partnership in books of partner

	Debit	Credit
XYZ A/c	xxxx
Cash		xxxx
(To record loan givne to the partnership)

No, loan is not at the same level as capital contribution because it does not change any capital ratio or profit sharing ratio or leads to change in partnership deed. It is treated as loan from any other party like bank or unsecured loans and for the loan interest is paid.