When a partner sells his interest to another party,the journal entry simply credits the withdrawing partner's capital account and debits the new partner's capital.

Question

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When a partner sells his interest to another party, the journal entry involves not only crediting the withdrawing partner's capital account but also debiting it. This is because the interest being sold must be accounted for, and the gaining partner's capital account must be debited because it is increasing in value. Additionally, any gains or losses on the sale must also be accounted for. Therefore, the correct journal entry would be more complex than simply crediting the withdrawing partner's capital and debiting the new partner's capital accounts.

When a Partner Sells His Interest to Another Party,the Journal