Question

On dissolution of the firm, Partners’ Capital Accounts are closed through ______.

Options

• Realisation Account

• Drawings Account

• Bank Account

• None of these.

Answer 1

On dissolution of the firm, Partners’ Capital Accounts are closed through Bank Account.

Explanation:

During the final stage of a firm’s dissolution, the partners’ capital accounts must be shut down permanently. After transferring the realisation profit or loss and reserves, the remaining balances represent the final amounts due to or from the partners. Since the business is closing down, these balances cannot be carried forward to a new year. They are completely closed by making final cash payments to the partners or collecting cash from them, which is processed directly through the bank (or cash) account.