Question

A partner gave a loan of Rs.20,000 to the firm. At the time of dissolution of the firm the net losses of the firm were 30,000. How much money will the partner get on dissolution?

• A. Nil
• B. 20,000
• C. 20,000 + 6% interest
• D. None of the above

Answer 1

The correct option is A Nil

In case of loss, two situations arise:
1. If partner's capital has a credit balance then his loan amount will be repaid. Following entry will be passed:
Partner's loan A/c Dr.
To Bank/Cash A/c
2. If a partner's capital has debit balance then loan amount will not be paid. loan amount is transferred to capital account of partner. Following entry will be passed:
Partner's loan A/c Dr.
To Partner's Capital A/c