Question

At the time of dissolution of the firm, "Loan of partners" (Loans given by partners to the firm) is paid out of the amount realised on the sale of assets:

Options

• After making the payment of loans given by a third party.

• After making the payment of the balance of capital accounts of partners.

• After making the payment of loans given by a third party and the balance of capital accounts of partners.

• Before the payment of loans given by the third party.

Answer 1

After making the payment of loans given by a third party.

Explanation:

After paying off third-party loans, the "loan of partners" (loans granted by partners to the firm) is reimbursed out of the sum realised on the sale of assets at the time of the firm's dissolution.