Partner's current accounts are transferred to the respective partners...................at the time of dissolution of a partnership.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Capital account
On dissolution every claim of a partner on the firm has to be brought into one account before the final settlement. The current account holds the partner’s share of profit, interest, salary and drawings, so its balance is transferred to his capital account, and the capital account is then closed by payment or by his bringing in cash.
Why the other options are incorrect
Option (2) Loan account — Incorrect. A partner’s loan is a separate claim that is paid before capital; the current account is part of his capital interest, not a loan.
Option (3) Drawings account — Incorrect. Drawings are themselves closed to the current or capital account; nothing is transferred into them.
Option (4) No transfer of current accounts — Incorrect. All accounts must be closed on dissolution; leaving the current account open would leave the partner’s claim unsettled.
NCERT (2026-27 edition):
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