Question

When a partner takes responsibility to make payment of any outside liability of the firm, the account credited will be:

• A. Realisation A/c
• B. Cash A/c
• C. Partner’s Capital A/c
• D. None of these

Hint:

If a partner settles any outside liability, the firm saves cash; the partner’s Capital A/c is credited instead.

Answer 1

The Correct Option is C

Step 1: Concept.
At dissolution, outside liabilities (like creditors, bills payable, loans) are usually settled by the firm. However, sometimes a partner personally undertakes to settle a liability.
Step 2: Accounting treatment.
- Realisation A/c is debited with the liability (transfer of obligation).
- Instead of paying cash, the partner assumes the liability. Therefore, his Capital A/c is credited.
Step 3: Why not Cash A/c?
Cash A/c is not affected because no payment is made from the firm’s side. The liability is directly taken over by the partner.
Step 4: Conclude.
Thus, the account credited is the Partner’s Capital A/c.
Final Answer: \[ \boxed{\text{Partner’s Capital A/c}} \]