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What is the main effect of adding interest in a loan account?

Answer and explanation

Correct answer: The amount payable increases

Interest on the loan is an additional financial obligation of the firm to the retiring partner. When it is added to the loan account, the account’s credit balance rises, and the amount that must ultimately be paid also rises. A reduction would result from repayment, not interest accrual. Bank and goodwill are not the direct effects described here.

Related tags

Partner LoanInterestCredit BalanceRetirement AccountingPartner's Loan AccountPartner S Loan AccountReconstitution Retirement Or Death Of A PartnerAccountancy

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