In the case of the Dissolution of partnership firm, which accounts ar…

In the case of the Dissolution of partnership firm, which accounts are opened:

(A) Realization Account

(B) Revaluation Account

(D) Bank Account

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → (A), (C) and (D) only

On dissolution the firm sells its assets, pays its liabilities and closes all its books. The accounts opened for this purpose record the realisation, the partners’ claims and the cash.

(A) Realization Account Correct. It records the sale of assets and payment of liabilities, and gives the profit or loss on realisation.

(B) Revaluation Account Incorrect. A Revaluation Account is prepared on reconstitution (admission, retirement or death), when the business goes on and assets are only revalued. On dissolution the assets are actually sold, so the Realisation Account does this work.

(C) Partners Capital Account Correct. The profit or loss on realisation and the final amounts due to or from each partner are settled through their capital accounts.

(D) Bank Account Correct. Cash received from assets and paid to creditors and partners passes through the Bank Account, and its final balance equals the amount payable to the partners.

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.”

NCERT (2026-27 edition):
Journal Entries – “… It may be noted that the aggregate amount finally payable to the partners must equal to the amount available in bank and cash accounts. Thus, all accounts of a firm are closed in case of dissolution.”