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:

1. (A), (C), (B), (D)
2. (B), (C), (D), (A)
3. (B), (A), (D), (C)
4. (C), (B), (D), (A)

During dissolution of a partnership firm, the accounting process follows a logical sequence:

Step 1: Transferring assets and liabilities to Realization Account (C)

All assets (except cash/bank) and liabilities are transferred to the Realization Account. This account is opened specifically to record the disposal of assets and settlement of liabilities.

Step 2: Realizing assets and payment of liabilities (B)

The actual sale of assets takes place and cash is collected. External liabilities are then paid off using the cash available. Any profit or loss on realization is calculated in the Realization Account.

Step 3: Preparation of Partners' Capital Accounts (D)

After realization is complete, the profit or loss on realization is transferred to partners' capital accounts in their profit-sharing ratio. Any remaining balances like reserves, accumulated profits/losses are also adjusted. This determines the final amount payable to or receivable from each partner.

Step 4: Preparing Bank Account (A)

Finally, the Bank Account is prepared to summarize all cash transactions during dissolution. It shows:

• Opening balance and receipts from asset realization on the debit side
• Payments to creditors, expenses, and final settlement with partners on the credit side

The final payment to partners (as per their capital account balances) closes all accounts.

Correct sequence: (C), (B), (D), (A)

Answer: Option 4