Question

There are two statements Assertion (A) and Reason (R):
Assertion (A): Private assets of a partner can also be used for paying off the firm’s debts.
Reason (R): Liability of a partner for acts of the firm is limited.
Choose the correct alternative from the following:

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

Hint:

Remember that in a general partnership, partners are jointly and severally liable, meaning even their private property can be claimed for settling firm debts.

Answer 1

The Correct Option is B

Step 1: According to the Indian Partnership Act, 1932, the liability of partners in a partnership firm is unlimited. Hence, if the firm's assets are insufficient to repay its debts, the partners' personal (private) assets can also be used. Therefore, Assertion (A) is correct.
Step 2: The Reason (R) says "Liability of a partner for acts of the firm is limited," which is incorrect because in a general partnership, each partner has unlimited and joint liability.
Step 3: Therefore, Assertion (A) is correct, but Reason (R) is incorrect.