The correct answer is: C. Partner’s loan is transferred to the Realisation account with other liabilities of the firm.
A dissolution of a firm is the process of winding up a business and distributing its assets to its creditors and owners. A partnership is a business owned by two or more people. When a partnership dissolves, the partners must pay off the partnership’s debts and then divide up the remaining assets.
A partner’s loan is a loan that a partner makes to the partnership. When a partnership dissolves, the partner’s loan is transferred to the realization account, along with other liabilities of the firm. The realization account is used to track the sale of the partnership’s assets and the payment of its debts.
The other options are incorrect for the following reasons:
- Option A is incorrect because a dissolution of a firm does not automatically result in the dissolution of a partnership. A partnership can continue to exist even if one of its partners dies or withdraws from the partnership.
- Option B is incorrect because the firm’s assets can also be used to pay off the partners’ loans.
- Option D is incorrect because a loan from a partner’s wife is not a liability of the partnership. It is a personal loan to the partner, and the partner is responsible for repaying it.