Arrange the following in correct sequence in the case of dissolution…

Arrange the following in correct sequence in the case of dissolution of a partnership.

(A) Preparing a Bank account
(B) Realizing assets and payments of liabilities.
(C) Transferring of assets and liabilities in realization account.
(D) Preparation of capital account of partners.

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → (C), (B), (D), (A)

On dissolution the books are closed by finding the profit or loss on realisation, sharing it among the partners and then paying them off. Each step needs the one before it.

(C) Transferring of assets and liabilities in realization account. — First, all assets (other than cash, bank and fictitious assets) and all outside liabilities are transferred to the Realisation Account at book values.

(B) Realizing assets and payments of liabilities. — Next, assets are sold and liabilities paid; these are recorded in the Realisation Account, whose balance is the profit or loss on realisation.

(D) Preparation of capital account of partners. — That profit or loss, reserves and partners' loans are taken to the capital accounts, which show the final amount due to or from each partner.

(A) Preparing a Bank account — Last, the partners are paid (or bring in cash) and the Bank Account closes; with the final payment the books of the firm are closed.

NCERT (2026-27 edition):
Accounting Treatment – “When the firm is dissolved, its books of account are to be closed and the profit or loss arising on realisation of its assets and discharge of liabilities is to be computed. For this purpose, a Realisation Account is prepared to ascertain the net effect (profit or loss) of realisation of assets and payment of liabilities which may be is transferred to partner’s capital accounts in their profit sharing ratio. Hence, all assets (other than cash in hand bank balance and fictitious assets, if any), and all external liabilities are transferred to this account. It also records the sale of assets, and payment of liabilities and realisation expenses.”

NCERT (2026-27 edition):
Terms Introduced in the Chapter – “… When all accounts are settled and the final payment is made to the partners for the amounts due to them, the books of the firm are closed.”