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If the amount in the loan account of a retired or deceased partner has not yet been paid by the firm, how will it be treated in the firm's books?

Answer and explanation

Correct answer: Liability

The unpaid amount in the loan account of a retired or deceased partner is an obligation payable by the firm. Therefore, it is shown as a liability, not as an asset, income, or reserve. Exam tip: any amount still payable by the firm to a partner is treated as a liability until it is settled.

Related tags

Partner Loan AccountRetirement Of PartnerDeath Of PartnerPartnership AccountsLiabilitiesPartner's Loan AccountPartner S Loan AccountReconstitution Retirement Or Death Of A Partner

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