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A retiring partner's loan account shows ₹60000 credit balance, but ₹75000 is paid through bank. If there was no interest, what does this indicate?

Answer and explanation

Correct answer: ₹15000 overpayment or error

The direct answer is A: ₹15,000 overpayment or an error. A credit balance of ₹60,000 means the firm owes the retiring partner ₹60,000. Since there is no interest, the amount paid through bank should equal ₹60,000. The actual payment is ₹75,000, so ₹75,000 − ₹60,000 = ₹15,000. Thus, ₹15,000 has been paid in excess, or an accounting mistake needs investigation. Option A is correct because it exactly explains the difference. Option B is wrong because the question clearly says there was no interest. Option C is wrong because the recorded liability is only ₹60,000, not ₹75,000. Option D is wrong because a partner’s loan balance is a liability, not income. Check the balance before recording final payment; a payment above the balance is a warning sign.

Related tags

OverpaymentError CheckLoan Account

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