Partner's Loan Account

Correct answer: A. Settlement is completed but payment is pending

After final amount due is determined the unpaid part becomes a loan. Treat it as firm liability and not as partnership right.

Correct answer: A. Retiring partner capital account

The amount due in capital account is removed and transferred to loan account. Therefore capital account is debited and loan account is credited.

Correct answer: A. Loan Account will be debited and Bank Account will be credited

Payment reduces or settles the firm’s loan liability to the retiring partner, so the Loan Account is debited. Since money is paid through the bank, the Bank Account is credited. The correct journal entry is: Partner’s Loan Account Dr. To Bank Account. Option B reverses both effects and is therefore incorrect. Exam tip: when a liability is settled, debit the liability account; when payment is made through bank, credit Bank Account.

Correct answer: A. 6 percent per annum

In absence of agreement partner loan generally carries 6 percent per annum interest. Use this safe rule when rate is not given in exams.

Correct answer: A. The rate specified in the agreement

The 6% rule for interest on a partner’s loan applies only when the partnership agreement does not prescribe a different rate. Since the agreement clearly specifies a rate, that agreed rate will govern. Option B states the general statutory rate, but it does not apply when a different rate has been agreed. Exam tip: Distinguish the Partner’s Loan Account from the Capital Account and check the agreement first.

Correct answer: A. Because it is an expense payable by the firm

Interest on a retiring partner’s loan is payable because the firm uses or retains an amount owed to that partner. It is therefore a finance expense and a charge against profit, recorded before the remaining profit is appropriated among partners. Appropriation means distribution of already determined profit, whereas loan interest is incurred to establish that profit. Hence A is correct.

Correct answer: A. Because the partner partnership right has ended

After retirement he no longer shares profits and losses. The unpaid amount becomes a lender like liability of the firm.

Correct answer: A. ₹10000

Eight months is ( \frac{8}{12} ) year. Interest is (200000 \times \frac{7.5}{100} \times \frac{8}{12}=10000).

Correct answer: A. ₹8400

The direct answer is A: total interest for the year is ₹8,400. For the first four months, the full loan of ₹180,000 remains unpaid. Interest = ₹180,000 × 6/100 × 4/12 = ₹3,600. After four months, ₹60,000 principal is paid, so the balance becomes ₹120,000. It remains outstanding for the next eight months. Interest for those eight months = ₹120,000 × 6/100 × 8/12 = ₹4,800. Total interest = ₹3,600 + ₹4,800 = ₹8,400. Option A is correct. Option B, ₹10,800, applies 6 percent to the full original loan for the entire year and ignores the repayment. Option C, ₹7,200, misses part of the interest. Option D, ₹6,000, uses an incorrect time or principal. Exam cue: divide the year into periods whenever principal is repaid during the year.

Correct answer: A. ₹2,18,000

Closing loan balance = opening balance + interest credited − payment made = ₹3,00,000 + ₹18,000 − ₹1,00,000 = ₹2,18,000. Therefore, option A is correct. Option C is incorrect because it does not deduct the payment. In such questions, add amounts credited to the loan account and subtract repayments.

Correct answer: A. ₹2,02,500

Interest = ₹2,50,000 × 5/100 = ₹12,500. Therefore, the total amount payable before the payment is ₹2,62,500. After deducting the payment of ₹60,000, the remaining loan is ₹2,62,500 − ₹60,000 = ₹2,02,500. Hence, option A is correct. Exam tip: add the interest to the loan balance first and then subtract the amount paid.

Correct answer: A. Executor loan account

The deceased partner amount is payable to his executor. If payment is deferred it is kept in executor loan account.

Correct answer: A. Executor loan account

The direct answer is A: the executor loan account is credited. When a partner dies, the amount finally due to the deceased partner is transferred to the executor’s account if it is not paid immediately. The journal logic is: debit the deceased partner’s capital account because its credit balance is closed, and credit the executor loan account because the firm now acknowledges a liability payable to the executor. Option A is correct because the executor becomes the party to whom the amount is owed. Option B is wrong because the deceased partner’s capital account is debited, not credited, when it is transferred out. Option C is wrong because bank is credited only when money is actually paid; this step is a transfer of liability, not payment. Option D is wrong because Profit and Loss Account is not the account receiving this payable amount. Memory cue: the receiver of the liability is credited; actual payment later credits Bank.

Correct answer: A. ₹4800

Ten months is ( \frac{10}{12} ) year. Interest is (96000 \times \frac{6}{100} \times \frac{10}{12}=4800).

Correct answer: A. Liability will be overstated

Payment should be on debit side of loan account. Recording it on credit side wrongly increases liability.

Correct answer: A. Loan balance will be understated

Interest due is added to the total amount payable to the partner and is credited to the partner’s loan account. If this credit is omitted, the amount payable recorded in the account will be lower, so the final loan balance will be understated. Option B shows the opposite effect, while the bank balance is not directly increased by this omission. Exam tip: Interest due to a partner increases the liability and is credited to the partner’s loan account.

Correct answer: A. Interest and principal reducing amount

Direct answer: Option A, separate the interest portion from the amount that reduces principal. A total payment can contain two parts. Interest is the charge for using the loan during a period; it is an expense and does not reduce the original loan principal. The remaining part of the payment reduces the principal balance. Thus, in a careful solution, first calculate or identify the interest, then subtract the principal-reducing amount from the outstanding loan. Option A is correct. Option B is wrong because goodwill and reserves are separate partnership adjustments and are not the two components of a loan payment. Option C is wrong because cash may be the method of payment, but sales are not a component that explains reduction of loan principal. Option D is wrong because stock and creditors belong to trading or liability records, not to the required split of this payment. For example, if total payment is ₹50000 and interest is ₹5000, only ₹45000 reduces principal. Remember: interest consumes part of the payment; principal repayment reduces the loan.

Correct answer: A. ₹11700

Interest for first 6 months is ₹7200 and for next 6 months on ₹150000 is ₹4500. Total interest is ₹11700.

Correct answer: A. ₹9400

Interest is ₹3000 for first 3 months then ₹4800 on ₹120000 for 6 months and ₹1600 on ₹80000 for last 3 months. Total interest is ₹9400.

Correct answer: A. ₹108600

Direct answer: The final balance including interest is ₹108,600, so option A is correct. The loan starts at ₹180,000. For the first 4 months, the full ₹180,000 remains: interest = 180000 × 6/100 × 4/12 = ₹3,600. After paying ₹30,000, the balance becomes ₹150,000 for the next 4 months: interest = ₹3,000. After paying ₹50,000 more, the balance becomes ₹100,000 for the final 4 months: interest = ₹2,000. Total interest is ₹3,600 + ₹3,000 + ₹2,000 = ₹8,600. Principal still due is ₹180,000 − ₹30,000 − ₹50,000 = ₹100,000. Final amount = ₹100,000 + ₹8,600 = ₹108,600. Option B omits interest, C is the original loan plus interest without repayments, and D is only the interest. Memory cue: calculate interest separately for each period between repayments.

Correct answer: A. ₹1,68,500

Final credit balance = Opening credit balance + Interest credited − Payment = ₹2,25,000 + ₹13,500 − ₹70,000 = ₹1,68,500. Crediting interest increases the Loan Account balance, while payment reduces it through a debit. Option C ignores the payment. Exam tip: In a partner’s Loan Account, add credit entries and subtract debit entries to find the closing balance.

Correct answer: A. Overpayment has occurred

The direct answer is A: overpayment has generally occurred. A retiring partner’s loan account normally has a credit balance because the firm owes money to that partner. A debit balance means the debit side is larger; in the usual settlement situation, this can happen when payments made to the partner exceed the amount actually payable. Option A is correct as the normal interpretation of a debit balance in this context. Option B is wrong because an increased payable would normally create or increase a credit balance, not a debit balance. Option C is not the best answer: outstanding interest would generally increase the firm’s liability and produce a credit amount, unless a special adjustment is explicitly given. Option D is wrong because goodwill is an adjustment in partners’ accounts, not the normal meaning of a debit loan balance. Always compare total credits due with total debits or payments before concluding.

Correct answer: A. Interest will be credited

Unpaid interest due on the partner’s loan is an additional liability of the firm and increases the amount payable to the partner. Therefore, the partner’s Loan Account is credited with the interest amount. Debiting the Loan Account would reduce the liability, so option B is incorrect. Exam tip: when unpaid interest increases the amount payable under a liability account, that account is credited.

Correct answer: A. Interest on loan account debit and bank account credit

If paid immediately interest may be recorded directly as expense and bank payment. Separate credit to loan account is not necessary.

Correct answer: A. Retiring partner loan account debit and bank account credit

The direct answer is A: debit the retiring partner’s loan account and credit the bank account. First understand the sequence. When interest is credited to the loan account, the amount owed to the retiring partner increases, so the loan account is credited. That interest is already included in the loan balance; it must not be recorded again when payment is made. At payment, the firm gives money through the bank, so the bank balance decreases and Bank Account is credited. The liability to the partner also decreases, so the partner’s Loan Account is debited. Therefore the entry is: Retiring Partner’s Loan Account Dr. To Bank Account. Option A is correct because it records both the reduction of the liability and the reduction of bank money. Option B is wrong because Interest Account should not be debited again after interest has already been transferred to the loan account. Option C is wrong because Bank Account is not debited when money leaves the bank; it is credited, and the loan account is not credited at settlement. Option D is wrong because Profit and Loss Account is not involved in this payment entry. Memory cue: when an existing liability is paid, debit the liability account and credit Cash or Bank.