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

The correct answer is Option (2) → Realisation A/c

On dissolution, all external liabilities are closed by transferring them to the credit side of the Realisation Account. A bank overdraft is money the firm owes to its bank, so it is an external liability like creditors or a bank loan, and it goes to the Realisation Account. Its payment is then recorded by debiting the Realisation Account and crediting Cash/Bank.

Note: The NTA Answer Key accepted both Option (1) Bank A/c and Option (2) Realisation A/c. Option (1) does not seem to be correct: the book closes every external liability, bank overdraft included, by transferring it to the credit of the Realisation Account, and the book’s own answer to this very question is (c) Realisation Account. Only Option (2) is supported by the textbook.