Question : C's Capital Account has a credit balance of Rs.2,00,000; C's Loan Account is showing a debit balance of Rs.40,000. Bank Balance is Rs.3,00,000. Show the treatment of C's Loan Account.
Option 1: Debited C's capital Rs 40,000 and credited C's Loan account Rs 40,000
Option 2: Debited C's capital Rs 1,60,000 and credited C's loan Rs 1,60,000
Option 3: Credited C's capital Rs 40,000 and debited C's loan Rs 40,000
Option 4: None of the above
Correct Answer: Debited C's capital Rs 40,000 and credited C's Loan account Rs 40,000
Solution :
Answer =
Debited C's capital Rs 40,000 and credited C's Loan account Rs 40,000
C's Loan [Dr balance] mean the firm had given the loan to Partner. At the time of dissolution of the Partnership firm, the Partner's Loan will transferred to Partner's Capital account.
Partner's Capital A/C Dr.
To Partner's Loan. A/c.
Hence, the correct option is 1.
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