Which of the following statements is (are) true?

1. I. In the calculation of the loss absorption potential for a partner, a partner's loan balance (an amount that is owed by the partnership) should be added to the partner's capital balance.
2. II. In liquidation, a partner's loan balance (an amount that is owed by the partnership) should be paid to the partner as a creditor of the partnership after the outside creditors.

Multiple Choice

• Both I and II

• II only

• Neither I nor II

• I only