Only the assets of the firm can be used for the payment of the firm's liabilities
Loss on realisation is transferred to partners, capital accounts in their capital ratio
Any amount realised from the sale of an unrecorded asset is credited to the realisation account
Partners loan to the firm is transferred to the realisation account with the liabilities of the firm
Answer is Right!
Answer is Wrong!
The correct answer is: B. Loss on realisation is transferred to partners, capital accounts in their capital ratio.
Explanation:
When a partnership firm is dissolved, the assets of the firm are sold and the proceeds are used to pay off the liabilities of the firm. Any remaining assets are then distributed to the partners in their capital ratio. If there is a loss on realization, it is also transferred to the partners’ capital accounts in their capital ratio.
Here is a brief explanation of each option:
- Option A is incorrect because the liabilities of the firm can also be paid off from the partners’ capital accounts.
- Option B is correct because the loss on realization is transferred to the partners’ capital accounts in their capital ratio.
- Option C is incorrect because any amount realized from the sale of an unrecorded asset is credited to the realization account, not the partners’ capital accounts.
- Option D is incorrect because partners’ loans to the firm are not considered liabilities of the firm. They are considered assets of the firm and are therefore transferred to the realization account with the other assets of the firm.