Podcast
Questions and Answers
Where does the loan from a partner appear on a Statement of Financial Position?
Where does the loan from a partner appear on a Statement of Financial Position?
- Current Liability
- Non-Current Liability (correct)
- Current Asset
- Non-Current Asset
How is interest on a loan from a partner recorded when it is due but not yet paid?
How is interest on a loan from a partner recorded when it is due but not yet paid?
- Debit: Partner X Current Account; Credit: Interest on Loan Account
- Debit: Bank Account; Credit: Partner X Current Account
- Debit: Interest on Loan Account; Credit: Partner X Current Account (correct)
- Debit: Interest on Loan Account; Credit: Bank Account
How is the interest on loan account treated in the income statement?
How is the interest on loan account treated in the income statement?
- Transferred to the credit side
- Added to the capital account
- Transferred to the debit side (correct)
- Ignored
Which of the following statements is NOT true about loans from partners?
Which of the following statements is NOT true about loans from partners?
Which accounting entry is used when a partnership repays a loan obtained from a partner?
Which accounting entry is used when a partnership repays a loan obtained from a partner?
Flashcards
Partner Loan
Partner Loan
A loan borrowed from a partner in the business for temporary financing.
Loan Repayment
Loan Repayment
The process of returning borrowed money to a partner at an agreed time.
Interest on Loan
Interest on Loan
A business expense incurred on the loan from a partner, separate from profits or losses.
Loan Account in Balance Sheet
Loan Account in Balance Sheet
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Recording Interest Payable
Recording Interest Payable
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Study Notes
Partnership Loans
- Partnerships can borrow money from a partner if needed, for a set period. These loans aren't part of the business's capital. They're treated like outside loans.
- Unlike investing more capital, loans to a partnership from a partner have a set repayment time and interest.
- Interest on partner loans is a business expense, not affected by the profit or loss amount.
Loan Recording
- Obtaining a loan: Debit bank account, Credit loan from partner X account
- Repaying a loan: Debit loan from partner X account, Credit bank account
- Financial Position: The loan account is a non-current liability.
- Interest Payment (Paid): Debit interest on loan account, Credit bank account
- Interest Payment (Due, but not paid): Debit interest on loan account, Credit partner X current account
- Interest (Income Statement): Interest on the loan account is transferred to the income statement's debit side.
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