A partnership balance sheet is a financial statement that presents the assets, liabilities, and equity of a partnership at a specific point in time. This document is crucial for understanding the financial position of the partnership and reflects the capital contributions made by each partner, as well as any retained earnings or losses.

When a partner invests funds in a partnership, the transaction involves a debit to the cash account and a credit to a separate capital account. A capital account records the balance of the investments from and distributions to a partner. To avoid the commingling of information, it is customary to have a separate capital account for each partner.