On dissolution, how you
deal with partner’s loan if it appears on the
(a) Assets side of the
Balance Sheet
(b) Liabilities side of
the Balance Sheet
On dissolution, how you deal with partner’s loan if it appears on the
(a) Assets side of the Balance Sheet
(b) Liabilities side of the Balance Sheet
a) If
partner's loan appears on the assets side of the Balance Sheet then it implies
that the partner has taken loan from the business and is liable to pay back to
the business. In such case, the loan amount is transferred to his capital
account. Thus the accounting entry will be:
Partner’s Capital A/c
Dr.
To Partner's Loan A/c
(Partner's loan transferred
to Partner's Capital Account)
b) If partner's loan appears on the liabilities side
of the Balance Sheet then it implies that the partner has forwarded loan to the
firm and the firm is liable to pay back the amount to the partner. In such
case, partner's loan is paid off after paying all the external liabilities. The
partner's loan is not transferred to the Realisation Account, in fact, it is
paid in cash. The following accounting entry is passed.-
Partner’s Loan A/c
Dr.
To Cash/Bank A/c
(Partner’s loan paid in
cash)
a) If partner's loan appears on the assets side of the Balance Sheet then it implies that the partner has taken loan from the business and is liable to pay back to the business. In such case, the loan amount is transferred to his capital account. Thus the accounting entry will be:
|
Partner’s Capital A/c |
Dr. |
|
|
|
To Partner's Loan A/c |
|
|
(Partner's loan transferred to Partner's Capital Account) |
|
|
b) If partner's loan appears on the liabilities side of the Balance Sheet then it implies that the partner has forwarded loan to the firm and the firm is liable to pay back the amount to the partner. In such case, partner's loan is paid off after paying all the external liabilities. The partner's loan is not transferred to the Realisation Account, in fact, it is paid in cash. The following accounting entry is passed.-
|
Partner’s Loan A/c |
Dr. |
|
|
|
To Cash/Bank A/c |
|
|
(Partner’s loan paid in cash) |
|
|
