Question consists of two statements, namely, Assertion (A) and Reason (R). Select the correct answer.
Assertion (A): Partner’s loan account is prepared before partners’ capital accounts at the time of dissolution.
Reason (R): At the time of dissolution, capitals are paid off, only if, any balance is left after payment of partner’s loan.
Answer & explanation
Correct answer: option 1
Capital is the investment done by the partner’s themselves and thus at the time of dissolution of the partner the firm pays off the capital to the partners only after the settlement of the other liabilities including the loan given by any partner in proportion to their capital.