Question

On dissolution of the partnership firm of A, B and C, accumulated profits of ₹ 4,00,000 will transferred to which of the following account?

Options

• Revaluation Account

• Realisation Account

• Partners’ Capital Accounts

• Bank Account

Answer 1

Partners’ Capital Accounts

Explanation:

Accumulated profits (such as a General Reserve or a credit balance in the Profit & Loss Account) represent undistributed earnings that belong entirely to the owners of the business. At the time of dissolution, these profits are not transferred to the Realisation Account because they do not involve external third-party liabilities or saleable assets. Instead, they are distributed directly among all the partners by crediting their Partners’ Capital Accounts in their agreed profit-sharing ratio.