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When does the liability recorded in the loan account of a retiring or deceased partner cease?

Answer and explanation

Correct answer: On full payment

The amount payable to a retiring or deceased partner may be transferred to the partner’s loan account. It remains a liability of the firm and ceases only when the entire amount, including any due interest, is paid. Partial payment reduces the liability but does not eliminate it. Exam tip: A loan account remains outstanding until its complete settlement.

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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