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Subjects

Accountancy

Partner's Loan Account

In Class 12 Accountancy, Partner’s Loan Account explains how the amount due to a retiring or deceased partner is recorded when it is not paid immediately. Students learn to transfer the partner’s closing capital, current account balance, share of goodwill, accumulated profits or losses, and other adjustments to the loan account. The topic also covers interest on the outstanding loan and its repayment through instalments, helping learners prepare accurate journal entries and ledger accounts under reconstitution.

Expert · Level 4 · 25 questions

Practice questions

01Why is a loan account opened for the amount due to a retiring or deceased partner when it is not paid immediately?

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02When interest payable on a partner’s loan is paid in cash, on which side will the Cash Account be recorded in the journal entry?

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03A retired partner’s loan account has a balance of ₹1,80,000. If interest is payable on it at 5% per annum, what will be the interest for one year?

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04What accounting effect arises when a partner’s loan account is paid?

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05When the amount due to a retiring partner is not paid immediately, in which situation is the partner’s capital account closed and the balance transferred to the partner’s loan account?

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06After reconstitution, what will be the annual interest on a partner’s loan account of ₹4,00,000 at 3%?

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07When interest on a partner’s loan becomes due before it is paid, on the basis of which accounting concept is it recognised?

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08A partner’s loan account has a balance of ₹1,10,000. If the annual interest rate is 4%, what will be the interest for one year?

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09When the principal recorded in a retired or deceased partner’s loan account is paid in installments, what effect will each installment have on the firm’s books?

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10After retirement, the amount due to the retiring partner is transferred to the partner’s loan account. Who ultimately bears the interest payable on this loan account?

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11After reconstitution, a Partner’s Loan Account carries a balance of ₹60,000 on which interest is payable at 15% per annum. What will be the interest for one year?

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12When is a partner's loan account closed?

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13After interest is added to a partner’s loan account, its balance becomes ₹1,32,500. What is the accounting implication?

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14What is the main purpose of charging interest on a deceased partner’s loan account?

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15What will be the interest for one year on a partner’s loan account of ₹75,000 at 12% per annum?

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16The opening balance of a retiring partner’s loan account is ₹1,00,000. If 6% annual interest is added on the entire opening balance and ₹20,000 is paid during the year, what will be the closing balance of the loan account at the end of the year?

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17A retiring partner is entitled to ₹2,40,000. If 25% of this amount is paid immediately, what amount will be transferred to the partner’s loan account?

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18For the business, interest payable on a partner’s loan account is treated as what type of expenditure?

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19An amount of ₹1,75,000 payable to a deceased partner is transferred to the partner’s loan account. On which side of the firm’s balance sheet will this amount be shown?

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20What will be the annual interest on ₹96,000 in a retiring partner’s loan account at 7.5%?

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21What is the primary purpose of creating a partner’s loan account?

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22What amount of interest is payable on a partner’s loan of ₹2,25,000 at 8% per annum for 9 months?

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23After retirement, who benefits from the interest credited on a retiring partner’s loan account?

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24A partner’s loan account has a balance of ₹1,10,000. If ₹30,000 is paid from this amount, what will be the new balance?

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25What will be the interest for one year on ₹1,32,000 in a partner’s loan account at an annual rate of 5.5%?

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