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Subjects
Class 12AccountancyReconstitution - Retirement or Death of a PartnerPartner's Loan AccountHard
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If the agreement clearly says no interest, but the accountant added ₹8000 interest. Which correction is correct?

Answer and explanation

Correct answer: Debit Loan Account by ₹8000 and credit Profit and Loss Account by ₹8000

To remove wrong interest, both loan liability and expense are reduced. Exam tip: reverse the wrong interest entry.

Related tags

RectificationNo InterestAgreementPartner's Loan AccountPartner S Loan AccountReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq
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10 more MCQs
  1. 1When the full amount due to a retiring partner is not paid immediately, the unpaid balance is transferred to which account?
  2. 2What is the normal nature of a retiring partner's loan account?
  3. 3Interest on the retiring partner's loan account is given to whom?
  4. 4If the agreement does not mention an interest rate, what rate is generally applied on the retiring partner's loan?
  5. 5Interest on a retiring partner's loan account is debited to which account?
  6. 6In the journal entry for interest on a retiring partner's loan account, which account is credited?
  7. 7When the loan amount is paid to the retiring partner, which account is debited?
  8. 8When the loan is paid to the retiring partner, which account is credited?
  9. 9On which side does the opening balance of a retiring partner's loan account appear?
  10. 10If the amount due to the retiring partner is fully paid in cash, will a loan account be opened?
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