Varun (partner) had given a loan to firm of Rs. 5,00,000. On dissolution, he accepted furniture of Rs. 4,50,000 against the loan. The balance Rs. 50,000 will be:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Paid to him
A loan given by a partner to the firm is a debt of the firm, kept separate from his capital, and on dissolution it is repaid before any capital is returned. If the partner agrees to take an asset in part payment, only the unpaid balance remains, and the firm settles it by paying him in cash.
Loan by Varun = Rs. 5,00,000
Settled by furniture = Rs. 4,50,000
Balance still owed to him = Rs. 50,000, paid to him (Varun’s Loan A/c Dr. To Bank A/c)
Why the other options are incorrect
Option (1) Transferred to Realisation A/c — Incorrect. A partner’s loan is not an outside liability, so it is not transferred to Realisation Account; it is paid off directly.
Option (2) Transferred to Credit of Partner's Capital A/c — Incorrect. The Rs. 50,000 is a loan, not capital. It is not moved into his Capital Account; it is paid off as a debt of the firm, ahead of any return of capital.
Option (3) Transferred to Debit of Partner's Capital A/c — Incorrect. The firm owes Varun the Rs. 50,000; debiting his capital would charge him for money that is due to him.
NCERT (2026-27 edition):
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