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If loan payment is wrongly debited to Profit and Loss Account and the loan account is not debited, what will be the result?

Answer and explanation

Correct answer: Expenses and loan liability will be overstated

Principal repayment is not an expense and loan account should have been reduced. Exam tip: do not post repayment to Profit and Loss Account.

Related tags

Error AnalysisPrincipal PaymentProfit LossPartner's Loan AccountPartner S Loan AccountReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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