If due interest is not paid immediately where will it be shown?

Correct answer: By crediting it to loan account

The direct answer is A. When interest on a retiring partner’s loan is due but is not paid immediately, the firm still owes it. Therefore it must be added to the amount payable and credited to the loan account, according to the stated accounting treatment. Crediting the loan account increases the credit balance or liability because the firm’s obligation has increased. Option A is correct. Option B, sales account, is wrong because unpaid loan interest is not revenue from selling goods or services. Option C, drawings account, is wrong because drawings represent a partner’s personal withdrawal, not an amount owed by the firm as interest. Option D, stock account, is wrong because stock records goods held for sale and has no role in recording loan interest. The reasoning is: interest becomes due; it is not paid; unpaid due interest remains a liability; the liability is recorded by crediting the loan account. When payment is later made, the loan account is debited and cash or bank is credited. Memory cue: unpaid interest increases what the firm owes, so credit the liability account.