Which of the following statements are incorrect in relation to dissol…

The correct answer is Option (3) → (A), (B) and (D) only

On dissolution, a Realisation Account collects the firm's assets and its outside liabilities, and the assets are then applied to pay the outside parties first. The question asks for the incorrect statements, so each one is checked against these rules.

(A) Loan given by a partner is transferred to realisation account. Incorrect statement. Only external liabilities go to the Realisation Account. A partner's loan is not an outside liability; it is paid off separately after the outside creditors.

(B) Loan given by a partner is settled before outside party claims. Incorrect statement. The order is the other way. The firm's assets are applied first in paying the debts of the firm to third parties, and only then in repaying partners' loans.

(C) Dissolution expenses can be paid by a firm or partner(s). Correct statement. The firm may pay them, or a partner may pay them on behalf of the firm. Either way they are debited to the Realisation Account (or to the partner who has agreed to bear them).

(D) All assets are transferred to credit side of realisation account and liabilities are transferred to the debit side of realisation account. Incorrect statement. The sides are reversed. Assets are transferred to the debit side and liabilities to the credit side of the Realisation Account.