According to the personal account rule, when will a retiring partner’s loan account be credited?

Correct answer: When the amount payable by the firm increases

The governing concept is the personal account rule: credit the giver and debit the receiver. In the partner’s loan account, an amount credited to the account represents an increase in the firm’s liability toward that partner, because the firm now owes more. Thus, when the amount payable to the retiring partner increases, the loan account is credited, so option A is correct. When the firm makes a payment, the liability decreases and the loan account is generally debited, making option B unsuitable. A decrease in bank balance is a cash transaction, not the rule determining this account’s credit. Purchasing goods affects purchases or creditors, not the retiring partner’s loan account.