Partnership appropriation account and interest on a parnter loan

In my study question on completing partnership appropriation the task includes a statement that halfway into the financial year the Partner Paul has made a loan of £100,000 to the partnership (there are 3 partners) and it carries an interest rate of 4% but has not been accounted for yet.

I can not find anywhere in study material to show how the interest on the loan is accounted for ? Would I be correct in thinking it would be classed as an expense to the business and therefore appear on the SP&L ? If so debit expense account, but where would the credit entry go, would it be Partner Paul's current account ?

Many thanks in advance.


  • Pian32
    Pian32 MAAT Posts: 474 Dedicated contributor 🌟 🐵 🌟
    I think you'd treat it as a loan. So Debit interest and Credit the appropiate loan account. I would probably keep the loan separate on your workings and treat it separately to his standard account.

    I haven't come across this situation with partners before so could be wrong.
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  • douglasstroud
    douglasstroud Registered Posts: 288 Dedicated contributor 🌟 🐵 🌟
    The partner has introduced capital into the business so this will show on his capital account, the 4% interest will be time apportioned and then allocated to the partner from the profits before the remaining profits are shared at the agreed ratio between all the partners
  • KimRs
    KimRs Registered Posts: 6
    Thanks for your help
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