Partner's Loan Account

The unpaid amount due becomes a loan for the firm. Exam tip: distinguish immediate payment from unpaid settlement.

The loan is payable to that partner, so the account is opened in that partner's name. Exam tip: check both the person and the nature of account.

A credit balance shows that the firm has to pay the amount. Exam tip: treat credit balance of loan account as a liability.

Payment reduces the firm's liability, so it is recorded on the debit side. Exam tip: treat payment as a reducing item.

The unpaid amount creates a liability, so it appears on the credit side. Exam tip: credit when a liability is created.

The governing concept is the calculation of an unpaid balance after a part-payment. The total amount due to the retiring partner is ₹90,000. Since ₹30,000 has already been paid, the amount still payable and therefore transferred or retained as the loan is found by subtraction: Remaining loan = ₹90,000 − ₹30,000 = ₹60,000. Therefore, option A is correct. Option B represents the amount before payment and ignores the settlement made. Option C is only the amount already paid, not the remaining liability. Option D incorrectly adds the payment to the original amount. The calculation assumes that the entire payment is adjusted against the amount due and that no additional interest is included in the figures.

Loan amount and interest rate are the main bases for interest. Exam tip: include time also when it is given.

Six percent of ₹50000 is ₹3000. Exam tip: do not add interest to principal unless total payable is asked.

Six months is half a year, so interest is three percent of ₹72000. Exam tip: convert time into a fraction of a year.

Nine months is three-fourths of a year, so interest is four and a half percent of ₹40000. Exam tip: use months in the correct proportion.

The governing principle in partnership accounting is that the terms expressly agreed by the parties take priority. If the agreement clearly states the interest rate on a retiring partner’s loan, the firm must apply that contractual rate for the relevant period. Thus, option A is correct. A general statutory or customary rate is considered only when the agreement does not provide a rate or other applicable term. Option B is incorrect because six percent is not automatically substituted when a different rate has been agreed. Option C ignores the valid interest clause. Option D is also incorrect because the bank rate does not replace the agreed rate merely because the account is treated as a loan. The agreement therefore controls the calculation.

When the agreement is silent, six percent per annum is generally taken. Exam tip: note both rate and period.

Direct answer: option A, liabilities. A retiring partner’s loan represents an amount that the firm still owes to that former partner. An amount owed by the business is a liability, so the credit balance of this loan appears on the liabilities side of the balance sheet. Option A is correct. Option B, fixed assets, are long-term resources owned by the firm, such as buildings or machinery; a partner loan is not a resource. Option C, current assets, are resources expected to provide benefit, while this loan is an obligation. Option D, income, records earnings and is not the classification for an unpaid loan. The supplied answer is correct. Exam cue: ask “Who owes whom?” If the firm must pay the partner, show the amount as a liability.

Interest on loan is an expense borne by the firm. Exam tip: remember that expenses are debited.

Crediting it increases the amount payable to that partner. Exam tip: understand credit in loan account as increase in liability.

After the amount due to a retiring partner is transferred to the partner’s loan account, any payment made to the partner is recorded by debiting that account. This reduces the firm’s outstanding loan liability. It does not indicate an increase in income, sales, or capital. Exam tip: remember that a debit to the partner’s loan account generally represents repayment and a reduction in liability.

The total amount due is ₹1,00,000. Half of it is paid immediately, so the immediate payment is ₹50,000. The remaining unpaid amount is also ₹50,000, calculated as ₹1,00,000 − ₹50,000. This unpaid balance is transferred to the retiring partner’s loan account because it remains payable after retirement.

The full ₹1,00,000 cannot be placed in the loan account because half has already been settled. ₹1,50,000 and ₹25,000 do not follow from the stated facts. Therefore option A, ₹50,000, is correct. The key rule is that only the amount deferred for later payment becomes the partner’s loan.

The firm has to pay the retiring partner, so it is like a creditor account. Exam tip: treat it as a payable account.

Final payment covers both outstanding principal and due interest. Exam tip: add both while finding final amount.

A payment reduces the outstanding loan balance because it settles part of the amount payable. The remaining loan is found by subtracting the payment from the opening balance: ₹35,000 − ₹15,000 = ₹20,000. Therefore, option A is correct. Option B results from adding the figures, option C is only the payment made, and option D ignores the repayment entirely.

Each loan instalment repays a portion of the outstanding principal, so the balance in the partner’s Loan Account decreases successively. It does not become zero after every instalment unless the entire outstanding amount is paid at once. Exam tip: New balance = Previous balance − principal instalment paid.

The amount due to a deceased partner is payable to the executor. Exam tip: understand executor as the legal recipient.

Payment reduces the loan payable to the executor, so Executor's Loan Account is debited. Exam tip: note the debit side in payment entry.

The loan is payable to the executor, so interest is also payable to the executor. Exam tip: keep the recipient of principal and interest the same.

The governing concept is the dual effect of recording loan interest. When interest is charged to the firm’s Profit and Loss Account, it is recognised as an expense, so the firm’s total expense increases and its profit decreases. At the same time, crediting that interest to the retiring partner’s Loan Account increases the amount payable to that partner; therefore, the loan liability also increases. Hence, option A correctly states both effects. Option B reverses the liability effect and introduces an unrelated asset increase. Option C concerns sales and bank balances, neither of which follows merely from recording accrued interest. Option D mixes capital and sales effects that are not the accounting result of this entry.