Match List-I with List-II. LIST I(Different accounts) LIST II(Related…

Match List-I with List-II.

LIST I (Different accounts)	LIST II (Related transaction)
(A) Profit and loss account	(I) Dissolution of partnership
(B) Profit and loss appropriation account	(II) Dissolution of firm
(C) Revaluation account	(III) Interest on loan to partner
(D) Realization account	(IV) Transfer to reserve

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → (A) - (III), (B) - (IV), (C) - (I), (D) - (II)

Each account in List-I has its own job in partnership accounts.

(A) profit and loss account. — this matches (III) interest on loan to partner. Interest on a loan to or from a partner is a charge or income of the business, worked out before the profit is found, so it goes through the Profit and Loss Account.

(B) profit and loss appropriation account. — this matches (IV) transfer to reserve. The appropriation account shows how the net profit is divided: partners’ salary, commission, interest on capital and any amount transferred to reserve.

(C) revaluation account — this matches (I) dissolution of partnership. On a change in the agreement (admission, retirement, death) the partnership is dissolved but the firm goes on, so assets and liabilities are revalued through the Revaluation Account.

(D) realization account. — this matches (II) dissolution of firm. When the firm itself is dissolved, assets are sold and liabilities paid through the Realisation Account.

NCERT (2026-27 edition):
Profit and Loss Appropriation Account – “Profit and Loss Appropriation Account is merely an extension of the Profit and Loss Account of the firm. It shows how the profits are appropriated or distributed among the partners. All adjustments in respect of partner’s salary, partner’s commission, interest on capital, interest on drawings, etc. are made through this account.”

NCERT (2026-27 edition):
Revaluation of Assets and Reassessment of Liabilities – “… For this purpose the firm has to prepare the Revaluation Account. The gain or loss on revaluation of each asset and liability is transferred to this account and finally its balance is transferred to the capital accounts of the old partners in their old profit sharing ratio. In other words, the revaluation account is credited with increase in the value of each asset and decrease in its liabilities because it is a gain and is debited with decrease in the value of assets and increase in its liabilities is debited to revaluation account because it is a loss.”

NCERT (2026-27 edition):
Accounting Treatment – “When the firm is dissolved, its books of account are to be closed and the profit or loss arising on realisation of its assets and discharge of liabilities is to be computed. For this purpose, a Realisation Account is prepared to ascertain the net effect (profit or loss) of realisation of assets and payment of liabilities which may be is transferred to partner’s capital accounts in their profit sharing ratio. Hence, all assets (other than cash in hand bank balance and fictitious assets, if any), and all external liabilities are transferred to this account. It also records the sale of assets, and payment of liabilities and realisation expenses.”

NCERT (2026-27 edition):
Distinction between Dissolution of Partnership and Dissolution of Firm

Extract from the NCERT textbook