At the time of the Dissolution of a Partnership Firm, which statement…

The correct answer is Option (1) → The amount of Provision for Debtors is transferred to the Credit Side of the Realisation Account

On dissolution, debtors are transferred to the debit of the Realisation Account at their full book value. The provision for doubtful debts on them is closed with the outside liabilities, by transfer to the credit side of the Realisation Account, so the two together put debtors in at their net value.

Option (2) The amount of Provision for Debtors is transferred to the Debit Side of the Realisation Account — A false statement. The debit side receives the assets; a provision has a credit balance and goes to the credit side.

Option (3) The amount of Provision for Debtors is transferred to the Credit Side of the Bank Account — A false statement. No cash moves when a provision is closed, so the Bank Account is not used.

Option (4) The amount of Provision for Debtors is transferred to the Credit Side of the Capital Account — A false statement. The provision is not a gain to be shared directly; it goes to the Realisation Account, and only the final profit or loss reaches the capital accounts.