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After a partner's retirement, which of the following increases the balance of the partner's loan account when added to it?

Answer and explanation

Correct answer: Crediting interest on the loan

When the amount due to a retiring partner is retained in the partner's loan account, interest payable on that loan is credited to the account. This increases the total amount payable and therefore increases the loan account balance. Partial or full repayment reduces the balance, while closing the account eliminates the outstanding balance. Exam tip: Interest credited to a loan account increases its balance; repayment decreases it.

Related tags

Partner Loan AccountRetirement Of PartnerInterest On LoanReconstitution Of PartnershipAccounting EntriesPartner's Loan AccountPartner S Loan AccountReconstitution Retirement Or Death Of A Partner

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