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Question
On dissolution, the balance of a partner’s capital account appearing on the assets side of a balance sheet is transferred to ______.
Options
On the Debit of Realisation Account
On the Credit of Realisation Account
On the Debit of Partner’s Capital Account
On the Credit of Cash Account
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Solution
On dissolution, the balance of a partner’s capital account appearing on the assets side of a balance sheet is transferred to the debit of partner’s capital account.
Explanation:
During the dissolution of a firm, the balance of a partner’s capital account is debited when the partner receives cash or takes over assets. This reduces the partner’s capital to zero, reflecting that the firm has settled its obligations to that partner. The corresponding credit entry is made to the cash account or the realisation account if assets are taken over.
