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Subjects
Class 12AccountancyReconstitution - Retirement or Death of a PartnerPartner's Loan AccountExpert
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When interest payable on a partner’s loan is paid in cash, on which side will the Cash Account be recorded in the journal entry?

Answer and explanation

Correct answer: क्रेडिट

When interest is paid in cash, cash flows out of the business. A decrease in an asset is recorded on the credit side, so the Cash Account is credited. The relevant entry is: Interest on Partner’s Loan A/c Dr. To Cash A/c. Debit is incorrect because Cash Account is debited when cash is received, not when it is paid. Exam tip: identify a cash outflow by crediting the Cash or Bank Account.

Related tags

Partner LoanInterest PaymentCash AccountJournal EntriesPartnership AccountingPartner's Loan AccountPartner S Loan AccountReconstitution Retirement Or Death Of A Partner
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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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