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In the case of an amount due to a retiring or deceased partner, under which circumstance will the partner’s loan account not be created?

Answer and explanation

Correct answer: The entire amount due is paid immediately

If the entire amount due to the retiring or deceased partner is paid immediately, no balance remains outstanding and a loan account is unnecessary. If only part is paid, the unpaid balance is transferred to the partner’s loan account; fixing instalments or charging interest also indicates that an amount remains due. Exam tip: check whether the full amount has been settled—only an unpaid balance requires a loan account.

Related tags

Partner Loan AccountRetirement Of PartnerDeath Of PartnerReconstitution Of PartnershipOutstanding AmountPartner's Loan AccountPartner S Loan AccountReconstitution Retirement Or Death Of A Partner

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