Question

If any loan or advance is provided by a partner, then the balance of such loan account should be transferred to ______.

Options

• B/S Assets side

• B/S Liability Side

• Partner’s Capital A/c

• Partner’s Current A/c

Answer 1

If any loan or advance is provided by a partner, then the balance of such a loan account should be transferred to B/S liability side.

Explanation:

A loan or advance given by a partner to the firm is treated as a liability of the firm because it has to be repaid to the partner. Hence, in the Balance Sheet, the balance of such a loan account is shown on the liabilities side, separate from partner’s capital accounts.