On dissolution of a firm, bank overdraft is transferred to:

The correct answer is Option (3) → Realisation Account

A bank overdraft is an outside liability. Like creditors and bills payable, it is transferred to the credit side of the Realisation Account, and its payment is then debited there.

Option (1) Cash Account — Incorrect. Cash Account records only the actual payment of the overdraft.

Option (2) Bank Account — Incorrect. The overdraft balance is closed by transfer to Realisation Account; Bank Account shows only cash paid.

Option (4) Partner’s Capital Account — Incorrect. Only a liability a partner agrees to take over is linked with his capital account, and even then through Realisation Account.