How do you account for a loan taken by a retiring partner from the firm ??
Dear student
the amount of loan taken by the retiring partner from the firm can be treated by two ways:
1) it can be adjusted against the amount payable to partner on retirement
2) it can be kept as loan to partner's account in asset side of balance sheet. It can be decided by the partners if retiring partner will have to pay any intersect on the amount or how much rate of interest will be applicable or they may decide not to charge any interest.
I hope it helps you, if you still have any doubt, please get back to us.
Regards
the amount of loan taken by the retiring partner from the firm can be treated by two ways:
1) it can be adjusted against the amount payable to partner on retirement
2) it can be kept as loan to partner's account in asset side of balance sheet. It can be decided by the partners if retiring partner will have to pay any intersect on the amount or how much rate of interest will be applicable or they may decide not to charge any interest.
I hope it helps you, if you still have any doubt, please get back to us.
Regards