Give necessary journal entries for settlement of partner's loan at the time of dissolution of partnership firm under the following cases:
Loan from A ₹25,000, his capital account shows debit balance of ₹16,000.
Answer & explanation
Correct answer: option 3
The correct answer is option 3-
A's loan A/c Dr ₹25,000
To Bank A/c ₹9,000
To A's Capital A/c ₹16,000
Capital account has the debit balance of 16,000 which will be adjusted against loan. The (25,000 - 16,000) 9000 remaining in loan account of partner will be paid by firm to partner. So, the following journal entry is made for this-
A's loan A/c Dr ₹25,000
To Bank A/c ₹9,000
To A's Capital A/c ₹16,000