Partner's Loan Account

Since no interest is payable, the remaining loan is calculated as: outstanding loan − instalment paid = ₹1,50,000 − ₹60,000 = ₹90,000. Therefore, option A is correct. In such questions, when interest is absent, deduct only the amount paid from the outstanding loan; do not add the instalment or deduct it more than once.

The retiring partner’s loan is a liability of the firm and normally has a credit balance. When the loan is paid, the liability decreases, so the retiring partner’s loan account is debited. The corresponding amount is credited to the Bank or Cash Account. Exam tip: a decrease in a liability is recorded on the debit side of that liability account.

The governing rule for a liability account is that an increase in the amount payable is credited. Interest on a retiring partner’s loan is an expense for the firm, but it also increases the firm’s obligation to the retired partner. In the retiring partner’s Loan Account, the opening unpaid balance is credited and interest due is also credited, because both amounts are payable to the lender. Thus, option A, the credit side, is correct. The debit side generally records payments made to the partner, which reduce the outstanding liability. Recording interest on both sides would have no normal accounting basis, and leaving it unrecorded would understate the amount owed.

The amount due transferred from capital creates the loan account. Therefore it appears on the credit side of the loan account.

For installment payment the amount due is kept in a loan account. In case of death it is executor loan account.

Nine months is ( \frac{9}{12} ) year. Interest is (80000 \times \frac{6}{100} \times \frac{9}{12}=3600).

Because the payment is stated to be principal only, the entire ₹50,000 reduces the outstanding principal; no interest adjustment is involved. The remaining principal is calculated as ₹2,00,000 − ₹50,000 = ₹1,50,000. Therefore, option A is correct. Option B ignores the repayment, option C shows only the amount paid, and option D incorrectly adds the payment.

Interest on a retiring partner’s loan is determined by applying the agreed interest rate to the outstanding loan for the relevant time period. If instalments or part-payments occur, the outstanding principal changes and interest may need to be calculated separately for each period. Thus option A is correct. Sales, General Reserve and stock quantity are unrelated bases for this loan interest.

For the first six months full ₹100000 was outstanding. Interest is (100000 \times \frac{6}{100} \times \frac{6}{12}=3000).

The governing concept is that interest for a later period is calculated on the principal outstanding during that later period, not automatically on the original loan. The original principal is ₹100,000. After six months, the firm pays ₹40,000 towards principal, so the unpaid balance becomes ₹100,000 − ₹40,000 = ₹60,000. Consequently, interest for the next six months is charged on ₹60,000, assuming no further payment or special agreement changes the terms. Therefore, option A is correct. Option B is the original amount before repayment, option C is only the amount repaid, and option D incorrectly adds the payment to the loan instead of reducing it.

Unpaid interest remains payable to the partner. Therefore it is credited to loan account and increases liability.

The amount payable to the retiring partner is recorded in a loan account maintained in that partner’s name. The amount due is credited to the partner’s account, while payments made to the partner are debited, so its nature is similar to a personal account. A capital account records the partner’s capital, whereas the loan account records the separate liability payable to the partner. Exam tip: after the amount due is transferred to the loan account, subsequent payments are recorded in that account.

A retiring partner’s loan account is a personal account because it represents the amount payable to that partner. Under the personal-account rule, the person to whom the firm becomes liable is credited. Therefore, whenever the amount payable to the retiring partner increases, the loan account is credited. This may happen when the unpaid balance or interest is transferred to the loan account.

A payment reduces the liability and normally debits the loan account; a fall in bank balance records payment but is not the rule for crediting the loan. Purchasing goods has no direct connection with this account. Hence option A, when the amount payable increases, is correct.

In loan account credit side increases amount payable and debit side reduces it through payments. The credit balance shows liability.

Direct answer: option A. A retiring partner’s capital account is first adjusted for goodwill, revaluation, reserves, accumulated profits or losses, and the final profit or loss share. After these adjustments, the final amount payable to the retiring partner is calculated. If that amount is not paid immediately, it is transferred to the retiring partner’s loan account. Option A states this correct sequence. Option B is impossible because the loan arises from retirement settlement, not before the firm exists. Option C, selling goods, is unrelated to determining the partner’s entitlement. Option D, opening old books, is also unrelated and is not an accounting stage in this settlement. The supplied answer is consistent. Memory cue: adjust capital first, calculate amount due next, transfer unpaid amount to loan last.

When amount due is transferred to loan account the balance of capital account is cleared. Therefore capital account is closed.

The loan account shows how much the firm still has to pay. It separates settlement from actual payment.

If the installment is stated as ₹20000 the bank payment entry is for that amount. Interest may be credited separately to the loan account.

The governing concept is the separation of a combined payment into its interest component and principal component. The total payment of ₹24,500 contains both amounts, while ₹4,500 is specifically identified as interest. The portion that reduces the loan principal is therefore found by subtraction: Principal repayment = Total payment − Interest = ₹24,500 − ₹4,500 = ₹20,000. Hence, option A is correct. Option B is the whole cash payment and includes interest, so it cannot represent only the reduction in principal. Option C is the interest component itself, not principal repayment. Option D adds the two stated amounts and double-counts the interest instead of separating it.

Interest on the retiring partner’s loan is calculated only for the period during which money remains outstanding. Once a portion has been paid, that portion is no longer a loan or liability of the firm. Therefore, no further interest should be calculated on the amount already paid. Interest may continue on the unpaid balance for the applicable time, subject to the agreement.

The outstanding loan and the agreed amount are possible bases for calculation, with time also being necessary in a normal interest calculation. The amount already paid cannot be included after settlement. Hence option A is correct. This prevents charging interest twice on money that has already been paid.

For first 3 months full ₹120000 was outstanding. Interest is (120000 \times \frac{6}{100} \times \frac{3}{12}=1800).

The governing concept is that interest after a principal repayment is calculated on the revised outstanding balance. The original loan is ₹1,20,000. After three months, the firm pays ₹30,000 specifically towards principal. This payment reduces the liability, so the remaining principal is calculated as ₹1,20,000 − ₹30,000 = ₹90,000. Consequently, interest for the next nine months will be charged on ₹90,000, assuming the loan agreement does not prescribe a different method. Option A is therefore correct. Option B ignores the repayment and continues using the original balance. Option C is only the amount repaid, not the amount still outstanding. Option D incorrectly adds the repayment to the original loan, whereas a principal payment always reduces the amount owed.

Interest credit increases amount payable and payment of the same interest reduces it. Therefore there is no net effect on principal loan.

The amount payable to a retiring partner is transferred to the partner’s loan account and is reduced when payment is made. When the loan account shows a balance of ₹0, the retiring partner’s loan has been fully settled. It does not indicate an increase in goodwill, admission of a new partner, or closure of the bank account. Exam tip: A zero balance in the retiring partner’s loan account generally indicates that the liability has been paid off.

When the amount due to a retiring partner is not paid immediately, it is transferred to the retiring partner’s loan account. This account represents a liability of the firm. At the time of payment, the liability decreases; therefore, the retiring partner’s loan account is debited and the bank account is credited. Hence, both parts of the statement are correct. Exam tip: A decrease in a liability is recorded by debiting the liability account.