SPECIAL ACCOUNTS AND ENTRIES 187 



terest at 5% or 6% per annum is credited to the partners' 

 accounts, based on the capital in the business during the 

 year. This credit is offset by a debit to Loss and Gain 

 account. For example, after posting the entries, shown in 

 Illustrations 33 and 34, A. B. Clay's Capital account has 

 a balance of $1500 and Ike Laahre's of $2500, presumably 

 on March 1, 1918. If A. B. Clay withdraws the amount 

 of his profit, $500, his capital will be reduced to $1000. 

 This reduces the amount of capital available for the busi- 

 ness, thereby possibly impairing some larger operations 'an- 

 ticipated. In order to discourage such withdrawals, inter- 

 est at 5% is allowed on capital remaining in the business 

 throughout the year. In the case just cited, in which Clay 

 has $1000 and Laahre $2500 left in the business at the be- 

 ginning of the year, the entry for interest at the close of 

 the year is as follows: 



Loss and Gain $175 



A. B. Clay, Capital a/c $50 



Ike Laahre, Capital a/c 125 



Since losses and gains are shared equally, Clay 's account 

 will ultimately be debited with one-half of $175 or $87.50 

 as a result of the interest entry. That is, ne loses $37.50 

 (87.50 50) as a result of the interest agreement. Laahre 

 gains the same amount. 



Partners' Drawing Accounts. A Drawing account is 

 kept with each partner to serve as a substitute for the 

 Household account which is not practical in partnership 

 operations. Each one bears the name of a partner, as Mr. 

 Clay's Drawing a/c, Mr. Laahre's Drawing a/c. These 

 accounts receive all debits and credits affecting the part- 

 ners during the year, such as debits for withdrawals of 

 cash or produce for personal or household use, credits for 

 wages or salaries, share in losses or gains, etc. At the close 

 of the year it is customary to transfer an equal amount 



