Question

Assertion (A): Partner’s personal assets can be applied to pay firm’s debt.

Reason (R): In a partnership firm, partners have unlimited liability.

In the context of the above two statements, which option is correct?

Options

• Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of Assertion (A).

• Both, Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation of Assertion (A).

• Only Assertion (A) is correct.

• Assertion (A) is not correct, but the Reason (R) is correct.

Answer 1

Both, Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation of Assertion (A).

Explanation:

In a partnership firm, partners do not enjoy limited liability, meaning their personal property is legally tied to the business. If the firm's assets are insufficient to satisfy its outstanding external debts, the creditors hold the legal right to recover their dues directly from the private estates of the partners. Therefore, the assertion that personal assets can be used to pay firm debts is completely true, and it is directly and accurately explained by the reason that partners carry unlimited liability.