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Loan will not be entered in Partner's current or capital account, only interest on loan.
Loan from Partners
Loans from partners are treated in the same manner as loans from an external source. If one of the partners makes a cash loan to the firm quite apart from the capital that he has already contributed, the Loan Account is credited and the Cash Book is debited. The loan from any partner should not be credited to the partner's Capital Account as priority is given to the repayment of loans over repayments of capital.
An interest is payable to the partner who makes the loan. This interest is credited to the partner's Current Account to increase his equity and debited to a Loan Interest Account as an expense to the partnership business. At the close of the trading period, the amount from the Loan Interest Account is transferred to the debit side of the Profit and Loss Account.
If the interest is paid in cash to the partner, the Cash Book would have been credited and the Loan Interest Account debited. It will then not appear in the Current Account of the partner since this interest is no more owing to him.
