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On which side is the amount paid recorded in the retiring partner’s loan account?

Answer and explanation

Correct answer: Debit side

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.

Related tags

Partners-LoanRetirement-Of-PartnerLiability-AccountDebit-SideAccountancyPartner's Loan AccountPartner S Loan AccountReconstitution Retirement Or Death Of A Partner

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