Identify the correct sequence to be followed at the time of Dissolution of Partnership firm:

(A) Payment of Partner's Loan Account
(B) Realisation of Assets
(C) Prepare Cash/Bank Account
(D) Prepare Partner's Capital Account
(E) Payment of outsiders liability

Choose the correct answer from the options given below :

(B), (E), (A), (D), (C)

The correct answer is option 2- (B), (E), (A), (D), (C).

The correct sequence to be followed at the time of dissolution of a partnership firm is:

Realisation of Assets (B) - The firm’s assets are sold to convert them into cash. First of all, realization account is prepared to realize the assets and liabilities.

Payment of Outsiders' Liability (E) - After realizing the assets, the firm pays off any external liabilities.

Payment of Partner's Loan Account (A)- Any loans that partners have provided to the firm are settled.

Prepare Partner's Capital Account (D) - The capital accounts of the partners are prepared to determine the final balances after all transactions. After settling partner's loan account, partner's capital account is settled so their capital account is made.

Prepare Cash/Bank Account (C)- Finally, a cash/bank account is prepared to show how cash was received and distributed during the dissolution process. At last bank or cash account is made. No balance is left in cash or bank account as all the claims of the firm are settled.