A partner's loan is a liability and any interest paid on the loan by the partnership should be treated as:
A) an expense in the profit or loss summary account.
B) a distribution of profit in the profit or loss distribution account.
C) income in the profit or loss summary account.
D) a prepaid adjustment in the balance sheet.

Question

Quizplus · Accepted Answer

The interest paid on the partner's loan is considered an expense to the Partnership and should be recorded as such in the profit or loss summary account. This will accurately reflect the profitability of the Partnership and the impact of the loan on the Partnership's bottom line.

A Partner's Loan Is a Liability and Any Interest Paid