 In this presentation, we will record withdrawals from partners from the partnership. Our information is going to be here on the left side. We will record that into the general journal with journal entries and then post that to our worksheet to see the effect on the trial balance as well as the accounts in it. We have a trial balance as recorded in terms of assets in green, liabilities in orange. Then we have the capital accounts where we're going to be focusing our time. We have our partners of C, K, and M and then we've got revenue and expenses, debits are non-bracketed, credits are bracketed, zero means that the debits minus the credits are in balance, net income 7,000 which is the 10,000 minus the 3,000 to get to that 7,000. We're going to focus in on here on the partnership and this is really where it gets a little bit confusing because you'll note that a partnership's capital accounts can get rather long and cumbersome looking because we're going to need multiple partner capital accounts as opposed to a sole proprietor and it can even be more intimidating than a corporation many times because of the similarities with all the stockholders in a corporation can simplify that process a bit as well. The partnership, we're going to have like a sole proprietor a capital account and then a withdrawals account. That's usually the way the trial balance will be set up meaning if the partnership has investments in the company we usually just record that in the capital account but the withdrawals for whatever reason basically because there's going to be more withdrawals than investments hopefully. The withdrawals we typically record in its own account so we can track it separately as time passes. So in other words it would be nice we would expect that if everything went well the owner would put in an initial investment into the partnership and then from that point forward the partnership would earn revenue and then the owner would not be putting any more money into the partnership but would be withdrawing out on a regular basis and therefore we would want to track the withdrawals in a separate account because there will be significant activity there and we don't need really a separate account for capital investments but can just put that into the capital account itself because hopefully there's not going to be that many of them in the future. And so the other thing that goes into the capital account will be when we close out the process. We'll close out revenue and expenses there and we'll close out the draws there. So draws is a funny account then for most people to wrap their head around when we first think about it because it's kind of a capital account but it's not really on the balance sheet in terms of the financial statements because it's a temporary account meaning it's really the only one of the only it's pretty much the only temporary balance sheet account there is that we work with a lot. It's going to be this draws account or dividends for incorporation a similar type of account meaning all other temporary accounts that close out are on the income statement and they close out the capital account and they affect net income. This draws account does not affect net income but is temporary and will close out to the capital account. And the reason that's the case is because because it's a draw it's not part it's not an expense so we want to make sure we put it up here into the capital accounts. So let's see what that looks like we got draws for CK and M so C draws out 2000 so we're just going to say that cash is going to go down because he took money out of the company or the partnership so we're going to right click on cash copy and put that on the bottom in B3 right click and paste 123 the amount in D3 will be a credit which is a negative 2000 and then we'll debit something 2000 in C2 by saying I'm going to do the negative of this number and enter so there's the 2000 there now we just need to put that into the proper account which will be the C draws account so we'll copy C with draws right click and copy and put that in B2 right click and paste 123 now we'll post this out and see what happens so we're going to get these C withdrawals here here's the C withdrawals on the trial balance we want to be in H6 where we will say equals and point to that withdrawals of the 2000 bringing the balance up from 0 to 2000 note that the withdrawals is a debit balance account even though it's in the capital section that's because it's kind of like a contra capital accounts meaning it has a balance that's opposite to the normal balance for most capital accounts and that's because it's bringing capital down and we had owed the company the company or the business or the partnership owed C $40,000 if C took 2000 out then the difference is what is still owed 38 in this case so when we close this out at the end of the day at the end of the period the month or the year to the capital account will currently we'll have at that point 38,000 then the other side is going to go to cash which is in H2 where we will say equals point to that 2000 bringing the balance from 48,000 down by 2002 46,000 then we've got K's draws so K drew out 1000 once again is cash affected we'll say yes cash is going down so I'm going to right-click and copy cash we'll skip a line skip another line and put that on the bottom in B6 so within B6 we're going to say right-click and paste 1 then the amount is in D6 where we will say equals or just negative 1000 and then up above it will put the debit in C5 negative of this number where you can just type in 1000 but I like to put that little formula in there and then we're going to say that that's going to be case withdrawals so case withdrawals right-click and copy put that up top right-click and paste 123 so here we have case withdrawals are going to go here on the trial balance we're over in H8 where we will say equals and point to that 1000 bringing the balance up from 0 by 1002 1000 then we've got C the cash so cash is up top something's in it already in H2 therefore we will double click on it go to the end of it say plus and point to the 1000 bringing the balance from 46,000 down by 1002 45,000 so now we've got case withdrawals here bringing down the balance so we owed K 50,000 it took out 1000 we owe 49,000 at this time then we've got Ms. Draws so 1500 so again cash is going to go down so we're going to right-click and copy cash we're going to skip a line we're going to skip another line put that on the bottom in B9 right-click and paste 123 and then we'll go to the right in D9 and we'll put the negative 1500 and enter and then we'll put the same amount up top in C8 I'm going to do that with the negative of that number that's going to be the 1500 then we just need to put the amount or the capital account which will be Ms. withdrawals so Ms. withdrawals we will right-click and copy put that up top in B8 right-click and paste 123 now we'll post this out so Ms. withdrawals are here here's Ms. withdrawals we're going to be in H10 equals and we'll point to that 1500 and enter bringing the balance from 0 up by 1500 to 1500 then we're going to go up to H2 double-click on it go to the end of it plus point to that 1500 and enter so that brings the balance to 43,500 and we have recorded everything note that there's no effect on the income statement here so no effect on revenue and expenses that's kind of the point a mistake would be to pay out the cash and then debit some kind of expense account because that would lower net income improperly we want to put it into that temporary account but one which is not part of the net income and that makes sure that we don't mistake net income and also track the owners what is owed to the owners as we should because we want to be very careful to do that properly within a partnership so there's no disagreements within the partnership and we want to document all that as much as possible also note that there's a profit sharing of 321 here and that does not necessarily have anything to do with the withdrawals that has to do with how we're going to split the net income so it and unless the partnership agreement says that the withdrawals are limited in some way or must be in accordance with that same ratio it's not by default typically the case so meaning the partner can draw whatever they want in theory up to their capital account unless restricted by the partners and of course you know the partners are going to want to keep some type of capital in there and there might be some restrictions or some incentives to do so within the partnership agreements such as having more more of the net income allocated to you if you have more capital investment or just a restriction of a minimum balance or something like that but point being is that the withdrawals don't necessarily match the profit sharing amounts for the amount that will be withdrawn