Select the way by which provisions appearing in the Balance Sheet of a partnership firm are closed at the time of firm's dissolution.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Transferring them to the Credit of Realisation A/c
On dissolution, every outside liability, including provisions, is closed by transferring it to the credit side of the Realisation Account, just as assets are transferred to its debit side. A provision for doubtful debts goes there along with the liabilities, because the debtors themselves are transferred at their gross value.
Why the other options are incorrect
Option (1) Transferring them to the Credit of Partner’s Capital A/c — Incorrect. Only reserves and accumulated profits go to the partners’ capital accounts.
Option (2) Transferring them to the Credit of Partner’s Current A/c — Incorrect. Current accounts carry partners’ drawings, salaries and interest, not provisions.
Option (4) Transferring them to the Debit of Realisation A/c — Incorrect. The debit side of the Realisation Account receives assets, not liabilities.
NCERT (2026-27 edition): |