On dissolution of the firm, partner's capital accounts are closed through:

Bank Account

The correct answer is Option (2) → Bank Account

On the dissolution of a firm, the final settlement of a partner's account is done through the Bank Account .

• All entries, including the transfer of assets and liabilities, realization profit/loss, partner's salary, interest, and loan settlement, are completed first.

• The final remaining balance in each Partner's Capital Account represents the amount owed to or by the partner:

  • Credit Balance: The firm owes this amount to the partner, so the payment is made through the Bank Account. (Entry: Partner's Capital A/c Dr. to Bank A/c Cr.)

  • Debit Balance: The partner owes this amount to the firm, so the partner brings in the cash, which is recorded in the Bank Account. (Entry: Bank A/c Dr. to Partner's Capital A/c Cr.)

The process of dissolution is complete when the Bank Account closes with a zero balance, which proves that all accounts have been settled.