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Loan Settlement with Retiring Partner

Interest paid...

Question

Interest paid on the partner's loan is a/an for the business of partnership firm.

A

income

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B

expense

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C

assets

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D

loss

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Solution

The correct option is B expense
Interest paid on the partner's loan is an expense for the business, and we debit the interest account and credit partner's loan account.

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Interest on loan by partners is to the profits of the firm.

Q. LEGAL PRINCIPLE: Every partner in a partnership firm is liable for the acts of every other partner during the course of business of the partnership firm.
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Q. Pratibha, partner of a firm, has advanced loan to the firm of

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. The firm does not have a Partnership Deed. Will Pratibha get interest on the loan? If yes, at which rate and why?

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