On dissolution of a firm, Partner's Loan Account is transferred to:

The correct answer is Option (1) → Bank Account

A partner’s loan is a debt of the firm, but it is not an outside liability, so it is not transferred to Realisation Account. It is paid off separately through Bank, after the outside liabilities and before the partners’ capitals are settled. It is not merged with the capital or current account either.

The book asks the same question with a fourth option “None of the above”, and its answer key gives that option for the same reason: the loan is not transferred to any account but paid off. Here that fourth option is replaced by Bank Account, the account through which the loan is paid.