Question

Which of the following statement is Incorrect in the context of the dissolution of a partnership firm?

Options

• The realisable assets and third-party liabilities to be settled, are closed and transferred to the realisation account.

• The loan given by the partner to the firm is closed and transferred to the partner's capital account.

• The free reserves and accumulated losses are directly recorded in partners' capital accounts.

• Any asset against which a provision is created is transferred at the gross value to the realization account.

Answer 1

The loan given by the partner to the firm is closed and transferred to the partner's capital account.

Explanation:

A partner’s loan is not transferred to the Partner’s Capital Account. It is settled separately at the time of dissolution, after paying outside liabilities.