Partnership

Dissolution

Easy

common

At the time of dissolution of a Firm, the Loan from a Partner Account should be

Paid out separately

Transferred into Realization Account

Transferred into Partners' Capital Account

Transferred into Partners' Current Account

✅ Correct Option: 1

At the time of dissolution, Loan from a Partner Account represents a liability of the firm, but it is treated differently from other liabilities.

The Realization Account is opened to record the sale of assets and settlement of external liabilities only. Loan from a partner, though a liability, is not transferred to the Realization Account because it requires separate treatment.

The loan from a partner maintains its distinct identity from the partner's capital contribution. During dissolution, this loan is paid out separately to the partner before the final settlement of capital accounts.

The treatment would be recorded as:

Loan from Partner's Account Dr.

To Bank Account

This separate payment ensures that the partner receives the loan amount (along with any accrued interest) independently, giving it priority over the distribution of capital. The loan is not merged with the capital account unless there is a specific agreement between partners to do so.

The distinction is important because:

Loan carries interest (usually)
Loan has priority in payment over capital
Loan and capital are separate legal obligations

Therefore, Option 1 is correct - the loan is paid out separately and not mixed with realization or capital account entries.

2022: 15 July Shift 2

Identify the item credited to Realisation Account in the event of dissolution of a partnership firm.

2025: 27 May Shift 2

Anubha looked after the dissolution work for remuneration of Rs. 8,500 and agreed to bear dissolution expenses upto Rs. 6,000. Actual expenses paid by her were Rs. 7,600. In this case,

(A) Realisation A/c is debited by Rs. 10,100

(B) Anubha's Capital A/c is credited by Rs. 9,600.

(D) Anubha's Capital is credited by Rs. 10100.

Choose the correct answer from the options given below:

2023: 29 May Shift 2

Which mode of dissolution is highlighted in the above case?

2026: 19 May Shift 1

Match List-I with List-II

List-I	List-II
(A) Dissolution expenses of Rs. 7,800 were paid by partner.	(I) Realisation A/c ......Dr\nTo Bank A/c
(B) When a creditor accepts a fixed asset in payment of his dues.	(II) No Entry
(C) There was an outstanding bill for repairs which had to be paid.	(III) Bank A/c ........Dr\nTo Realisation A/c
(D) There was an unrecorded investment sold.	(IV) Realisation A/c .... Dr\nTo Partner's Capital Account

Choose the correct answer from the options given below so that all items are matched:

2022: 15 July Shift 2

A firm is dissolved at the time of

2026: 11 May Shift 2

Match the LIST-I with LIST-II

LIST-I		LIST-II
A. The accumulated profits and reserves are transferred to	I.	No journal entry
B. In case of dissolution partner's capital accounts are closed through	II.	Bank Account
C. Unrecorded assets are transferred to	III.	Partners' Capital Accounts
D. For settlement of the creditor's through transfer of assets in full and final settlement of his account	IV.	Realisation Account

Choose the correct answer from the options given below:

At the time of dissolution of a Firm, the Loan from a Partner Account should be

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