The entry to record the salary and interest allowance on capital invested but not withdrawn from the partnership requires a debit to the Income Summary account and a credit to the partner's capital account.

Question

Quizplus · Accepted Answer

This entry is correct. The salary and interest allowance are expenses for the partnership and should be recorded as a debit to the Income Summary account. However, since the capital invested has not been withdrawn from the partnership, it is still considered a contribution to the business and should be credited to the partner's capital account.

The Entry to Record the Salary and Interest Allowance on Capital