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Final Settlement with Partner (Dissolution)

The payment o...

Question

The payment of loans due to partners is done by debiting A/c and crediting A/c.

A

Bank, Fictitious Asset

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B

Fictitious Asset, Bank

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C

Partner's Loan, Bank

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D

Bank, Partner's Loan

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Solution

The correct option is C Partner's Loan, Bank
Partner's Loan A/c is debited while Bank A/c is credited for payment of loans due to partners. A loan is not part of the partner's capital, and the loan is treated in the same way as a loan from a third party. The liability of partnership will be recorded by the creation of a liability, resulting in a credit balance for the amount of the loan.

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Final Settlement with Partner (Dissolution)

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