Rahul a partner decided to pay off creditor of ₹50,000 in full settlements of loan to Rahul by firm of ₹50,000 at the time of dissolution. Entry to be passed will be :

Realisation A/c Dr. ₹50,000
       To Rahul's Loan A/c ₹50,000

The correct answer is option 2-
Realisation A/c Dr. ₹50,000
       To Rahul's Loan A/c ₹50,000

* Creditors are transferred to the realisation account. At that time entry was passed for it- Creditors Dr. To realisation A/c.
* Loan to Rahul is treated separately. It is not transferred to realisation account. At the time of payment loan to partner account is credited and bank account is debited to show the settlement of loan by partner.

Now Rahul agreed to settle creditors in return of his loan, so realisation account is debited and loan of the partner is credited. So, the correct journal entry is -
Realisation A/c Dr. ₹50,000
       To Rahul's Loan A/c ₹50,000