Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 6 - No. 11)
In the case of a partner's loan to the business, which of the following accounting treatments is correct?
The loan is considered a capital contribution.
Interest paid on the loan is an appropriation of profit.
Interest paid on the loan is a business expense.
The loan does not affect the profit or loss of the business.
Explanation
Interest on a partner's loan is treated as a business expense, reducing the profit or loss.
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