If any loan is provided by a partner to partnership firm, where the balance of such loan is transferred in the books of partnership firm?

Liability side of balance sheet

The correct answer is option 3- Liability side of balance sheet.

Partners loan is also like any other loan for the firm, so it is liability for business and shown in liability side of the balance sheet.

According to accounting principles and the Indian Partnership Act, 1932, When a partner gives a loan to the partnership firm (other than capital contribution), it is treated as a liability of the firm. This is not part of capital or current account; it is a separate loan payable. Therefore, it is shown on the liability side of the balance sheet. It is a debt owed by the firm to the partner.