Question

Wayne, Shaan and Bryan were partners in a firm. Shaan had advanced a loan of Rs 1,00,000 to the firm. On 31st March, 2024 the firm was dissolved. After transferring various assets (other than cash \& bank) and outside liabilities to Realisation Account, Shaan took over furniture of book value of Rs 90,000 in part settlement of his loan amount. For the payment of balance amount of Shaan's loan Bank Account will be credited with:

• A. Rs 1,00,000
• B. Rs 90,000
• C. Rs 1,90,000
• D. Rs 10,000

Hint:

Partner's loan to the firm is paid off separately during dissolution, after external liabilities. It's not transferred to the Realisation Account. If a partner takes over an asset in settlement (part or full) of their loan, the loan account is debited, and the asset (if already in Realisation A/c) or Realisation A/c (if asset not transferred earlier, which is less common for loan settlement) or directly the asset if outside Realisation is credited. Any remaining balance is paid via Bank A/c (crediting Bank).

Answer 1

The Correct Option is D

Shaan's Loan to the firm is an internal liability, but it is paid *after* outside liabilities and *before* partners' capitals upon dissolution. It is not transferred to the Realisation Account. Total amount of loan advanced by Shaan = Rs 1,00,000. Shaan took over furniture (an asset) in part settlement of his loan. The value at which he takes over the asset reduces the loan liability. Value of furniture taken over = Rs 90,000. Balance amount of Shaan's loan remaining to be paid = Total Loan - Value of Asset Taken Over \[ \text{Balance Loan Payable} = 1,00,000 - 90,000 = Rs 10,000 \] This balance amount of Rs 10,000 needs to be paid to Shaan in cash/bank. The journal entry for this payment would be: Shaan's Loan A/c Dr. 10,000 To Bank A/c Cr. 10,000 (Being balance of loan paid to Shaan) The question asks what amount the Bank Account will be credited with for the payment of the balance amount of Shaan's loan. From the journal entry, the Bank Account is credited with Rs 10,000.