Question

Assertion (A): In a partnership firm, the private assets of the partners can also be used to pay off the firm’s debts.
Reason (R): The liability of the partners for acts of the firm is limited.
Choose the correct option from the following:

• A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
• B. Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
• C. Assertion (A) is false, but Reason (R) is true.
• D. Assertion (A) is true, but Reason (R) is false.

Hint:

In a partnership, partners have unlimited liability, unlike in a company where shareholders' liability is limited to their shareholding.

Answer 1

The Correct Option is D

In a partnership firm, the partners have unlimited liability, which means that in case the firm’s assets are insufficient to pay off its debts, the personal assets of the partners can be used to settle the liabilities. However, the statement in Reason (R) is incorrect as the liability of the partners in a partnership firm is not limited; it is unlimited.