Tree diagrams can be used to show the sale of a partner's interest to another party and the three possible relationships of an additional new partner's investment to the new partner's equity in the Capital account. These same relationships can be shown for the withdrawal of a partner. The following tree diagram shows the effect on equity with the addition of a new partner. The numbers shown parenthetically can be coded to examples and journal entries given for each possible relationship.
Students then have a cross-reference from the diagram to the example and journal entry.
The next tree diagram shows the effect on equity for the withdrawal of a partner. Again the numbers in parentheses can be used as a cross-reference from the diagram to the example and journal entry. Students find that the tree diagram is a helpful visual aid for sorting out the different possible scenarios that can occur with the addition or withdrawal of a partner from a partnership. South-Western College Publishing. All Rights Reserved.