In the case of dissolution of firm, accumulated losses are transferred to:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Capital Accounts in Profit Sharing Ratio
At the time of dissolution of a firm, any accumulated losses (like debit balance of Profit & Loss Account or Deferred Revenue Expenditure) are shared by the partners.
-
These losses are not transferred to the Realisation Account, because they are not related to the sale of assets or payment of liabilities.
-
Instead, they are transferred directly to the partners’ Capital Accounts in their profit-sharing ratio, since they represent losses of the firm that must be borne by the partners.