On dissolution of the firm, the partner’s capital accounts are closed through:
Answer & explanation
Correct answer: option 2
The correct answer is option 2- Bank A/c.
On dissolution of the firm, the partner’s capital accounts are closed through Bank A/c.
For settlement of partners’ accounts-
If the partner’s capital account shows a debit balance after posting all related journal entries firms. He brings in the necessary cash for which the entry will be:
Bank A/c Dr.
To Partner’s Capital A/c
The balance is paid to partners whose capital accounts show a credit balance and the following entry is recorded.
Partners’ Capitals A/cs (individually) Dr.
To Bank A/c
* It may be noted that the aggregate amount finally payable to the partners must equal to the amount available in bank and cash accounts. Thus, all accounts of a firm are closed in case of dissolution.