State the difference between partner's capital account and partner's loan account?
Dear Student,
Amount invested/contributed by a partner in a partnership business is termed as partner's capital. Partner's capital A/c is an ownership/equity amount of business and forms the last liability of the firm after all other liabilities are paid off. Capital A/c is entitled for Interest on capital,partner's salary,share of profit. Also interest on drawings is deducted from the account. No requirement to pay off the amount unless partner retires or leaves the business.
Whereas Partner's loan A/c refers to the amount provided by partner to the firm in terms of Loan. It is a liability of the firm & Firm provides interest on such loan amount to the partner. It is required to be paid off within agreed time period.
Regards,
Amount invested/contributed by a partner in a partnership business is termed as partner's capital. Partner's capital A/c is an ownership/equity amount of business and forms the last liability of the firm after all other liabilities are paid off. Capital A/c is entitled for Interest on capital,partner's salary,share of profit. Also interest on drawings is deducted from the account. No requirement to pay off the amount unless partner retires or leaves the business.
Whereas Partner's loan A/c refers to the amount provided by partner to the firm in terms of Loan. It is a liability of the firm & Firm provides interest on such loan amount to the partner. It is required to be paid off within agreed time period.
Regards,