On dissolution, how you deal with partner’s loan if it appears on the
Assets side of the Balance Sheet
If partner's loan appears on the assets side of the Balance Sheet then it implies that the partner has taken loan from the business and is liable to pay back to the business. In such case, the loan amount is transferred to his capital account. Thus the accounting entry will be:
Partner’s Capital A/c Dr.
To Partner's Loan A/c
(Partner's loan transferred to Partner's Capital Account)