Thanks Rustler! Just a follow up question, so even though the purchase agreement states the buyout to be in installments (that is, payments are to be made for 12 months after the partnership closed), I need to post to Partner A’s drawing account the full amount correct? Dr Partner A drawing (full amount) and Cr Partner B Liability account (full amount).
We’ve continued using the same books for more than 6 months now and Partner B is making the payments using company funds. I have been posting the payments to his drawing account. Dr Draws and Cr Bank. What do I do with the Liability account created as a result of the partnership closure that will still show on the balance sheet? Thanks again!