Based on following case, answer question.

Nayana and Arushi were partners sharing profit equally. Their Balance Sheet as at March 31, 2017 was as follows:

The firm was dissolved on the above date:

(1) Nayana took over 50% of the stock at 10% less on its book value, and the remaining stock was sold at a gain of 15%. Furniture and Machinery realised for Rs. 30,000 and Rs. 50,000 respectively.
(2) There was an unrecorded investment which was sold for Rs. 34,000
(3) Debtors realised 90% only and Rs. 1,200 were recovered for bad debts written-off last year.
(4) There was an outstanding bill for repairs which had to be paid for Rs. 2,000

Which treatment will be done to the current account of partner at the time of dissolution of firm?

All the necessary transactions are done in partners current account and the balance will be transferred to fixed capital account of partner.

The correct answer is Option (1) → All the necessary transactions are done in partners current account and the balance will be transferred to fixed capital account of partner.

All dissolution-related transactions are initially recorded in the partners' current accounts. Once all transactions are completed, and the final balances are determined, these balances are then transferred to the fixed capital accounts. This method ensures that the current account accurately reflects the partner's share of the dissolution process before being moved to the fixed capital account.