Partner's Loan Account

Four months is one-third of a year so interest is two percent of ₹48000. Exam tip: treat four months as one-third of a year.

Interest depends on the time period so the date is important. Exam tip: wrong period gives wrong interest.

Each instalment reduces the loan liability so the loan account is debited. Exam tip: record instalments like payments.

The governing concept is that the total amount payable on a loan includes both the outstanding principal and the interest charged on it. Therefore, the required calculation is: principal loan ₹52,000 + interest ₹7,000 = total payable amount ₹59,000. Hence, option A is correct. Option B represents only the principal and ignores the interest; it is not the final amount due. Option C results from subtracting interest from the principal, which is not appropriate when interest is added to the liability. Option D represents only the interest. In a partner’s loan account, the amount due is increased by interest unless it has already been paid separately.

Loan account relates only to unpaid amount due, interest, and payment. Exam tip: do not record unrelated items.

This account records the amount payable and payments to the retiring partner. Exam tip: understand it as a personal settlement account.

The governing concept is that a payment made to a retiring partner reduces the amount owed by the firm. The unpaid balance is calculated by subtracting the amount paid from the total amount due: ₹1,10,000 − ₹70,000 = ₹40,000. Thus, ₹40,000 remains payable and is shown as the balance in the partner’s loan account, so option A is correct. Option B is the amount already paid, not the remaining liability. Option C is the original amount before payment and therefore ignores the reduction. Option D incorrectly adds the payment to the amount due. The loan account records only the outstanding amount after the immediate settlement.

The correct final amount payable is found only after adding interest. Exam tip: calculate the updated balance before payment.

Recording payment on the wrong side will make the loan balance wrong. Exam tip: always check the correct payment entry.

A loan account normally has a credit balance so a debit balance needs checking. Exam tip: recheck calculations for abnormal balance.

The sum of unpaid amount and interest gives total amount payable. Exam tip: add both when total payable amount is asked.

Two months is one-sixth of a year so interest is one percent of ₹27000. Exam tip: treat two months as one-sixth of a year.

If the agreement clearly says no interest will be allowed, interest is not added. Exam tip: check the agreement term first.

After retirement, the amount due to the outgoing partner may remain unpaid and be transferred to a loan account. Until the firm actually pays that loan, the firm continues to use or owe the amount. Interest is therefore charged for the period during which the balance remains outstanding, ending on the date of payment or on another date specified by the agreement. Hence choice A is correct.

For example, if the loan remains unpaid for six months, interest is calculated for six months; once a payment is made, the balance for future interest becomes smaller. The date of a sale, admission of a new partner, or stock purchase does not by itself determine the interest period. The relevant fact is the unpaid loan balance and the time for which it remains due.

In the loan account, the sequence of amount due, interest, and payment is important. Exam tip: identify the base amount first.

New balance = Total loan − Payment = ₹36,000 − ₹16,000 = ₹20,000, so option A is correct. Option D is only the amount paid, not the amount remaining. Exam tip: subtract every payment from the outstanding loan balance.

Interest increases the amount payable to the retiring partner. Exam tip: place interest on the credit side of the loan account.

The direct answer is A: cash payment reduces the liability. A retiring partner is owed money by the firm. Until payment, that amount is a liability. When the firm pays cash, the payable amount becomes smaller; the accounting entry is to debit the partner’s loan account and credit Cash or Bank. Thus the liability decreases. Option A is correct because money paid out settles part of the obligation. Option B is wrong because payment does not create an additional obligation. Option C is wrong because payment itself does not increase interest; interest is calculated separately according to the agreed rate and period. Option D is wrong because the retiring partner’s capital has already been transferred or settled; paying cash does not increase capital. Remember: payment to a creditor means less liability; cash goes out, so Cash or Bank is credited.

The amount payable to the executor is a liability of the firm. Exam tip: remember the liabilities side even in case of death.

The whole amount due is unpaid so the full ₹88000 goes to the loan account. Exam tip: if no payment is made, the full due amount becomes loan.

Interest on loan is an expense of the firm and not distribution of profit. Exam tip: distinguish interest on loan from interest on capital.

Interest on a loan is charged on the amount that remains unpaid during the relevant period. The total amount due is ₹1,25,000, but ₹75,000 is paid immediately. After this payment, the outstanding balance is calculated by subtraction: ₹1,25,000 − ₹75,000 = ₹50,000. It is this unpaid balance that continues as the retiring partner’s loan.

Therefore, option A, ₹50,000, is the correct base amount for subsequent interest calculation, assuming the payment occurs before the interest period being considered. Option B would charge interest on the full amount even after part payment. Option C uses the amount already paid, which is no longer outstanding, and option D incorrectly adds the two amounts. The key rule is to calculate interest on the outstanding loan, not on amounts already settled.

Payment reduces and interest increases the loan so reversing them is wrong. Exam tip: check the sides carefully.

This account shows the complete settlement position. Exam tip: remember three main items amount due, interest, and payment.

After final payment, no liability remains and the account is closed. Exam tip: final balance should be zero.