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For the business, interest payable on a partner’s loan account is treated as what type of expenditure?

Answer and explanation

Correct answer: Revenue expenditure

Interest on a partner’s loan is the cost of borrowed funds used by the business. Therefore, it is a revenue expenditure and is debited to the Profit and Loss Account. This differs from interest on a partner’s capital, which is generally treated as an appropriation of profit. Exam tip: interest on a partner’s loan is a charge against profit, whereas interest on capital is usually an appropriation of profit.

Related tags

Partner Loan AccountInterest On LoanRevenue ExpenditurePartnership AccountsRetirement Of PartnerPartner's Loan AccountPartner S Loan AccountReconstitution Retirement Or Death Of A Partner

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