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, partners face unlimited liability. This implies that if the firm's assets cannot cover its debts, partners' personal assets will be utilized to satisfy those liabilities. The assertion in Reason (R) is factually incorrect because partner liability in a partnership firm is, in fact, unlimited, not limited.