On the dissolution of a firm, the Creditors are transferred to : Option 1: Realization Account Option 2: Bank Account Option 3: Cash Account Option 4: Partner's capital Account

Answer: Realization Account. Solution: On dissolution of a firm, a Realization Account is opened to record the disposal of assets and settlement of liabilities. All liabilities including Creditors are transferred to the credit side of Realization Account. Journal Entry:, Particulars, Debit (₹), Credit (₹), Creditors A/c, Dr., XXX, To Realization A/c, XXX, (Being creditors transferred to Realization Account), Why Realization Account? The Realization Account serves as a central account to: - Record all assets (except cash/bank) on the debit side - Record all liabilities including creditors on the credit side - Show the sale proceeds of assets - Show actual payment to creditors - Calculate profit or loss on realization When creditors are actually paid off, the entry is:, Particulars, Debit (₹), Credit (₹), Realization A/c, Dr., XXX, To Bank/Cash A/c, XXX, (Being creditors paid off), The creditors are not directly paid from Bank/Cash Account without routing through Realization Account, which is why Option 1 is correct.

Partnership

Dissolution

Easy

common

On the dissolution of a firm, the Creditors are transferred to :

Realization Account

Bank Account

Cash Account

Partner's capital Account

✅ Correct Option: 1

On dissolution of a firm, a Realization Account is opened to record the disposal of assets and settlement of liabilities.

All liabilities including Creditors are transferred to the credit side of Realization Account.

Journal Entry:

Particulars	Debit (₹)	Credit (₹)
Creditors A/c	Dr.	XXX
To Realization A/c		XXX
(Being creditors transferred to Realization Account)

Why Realization Account?

The Realization Account serves as a central account to:

Record all assets (except cash/bank) on the debit side
Record all liabilities including creditors on the credit side
Show the sale proceeds of assets
Show actual payment to creditors
Calculate profit or loss on realization

When creditors are actually paid off, the entry is:

Particulars	Debit (₹)	Credit (₹)
Realization A/c	Dr.	XXX
To Bank/Cash A/c		XXX
(Being creditors paid off)

The creditors are not directly paid from Bank/Cash Account without routing through Realization Account, which is why Option 1 is correct.

2025: 27 May Shift 2

At the time of dissolution of a Firm, the Loan from a Partner Account should be

2026: 20 May Shift 1

A, B and C constituted a partnership to carry out a venture to build offices for Zakash Office Sites Ltd. On the completion of venture under which way the dissolution of a firm will takes place?

2023: 20 June Shift 2

Select out of the following that is not considered as one of the modes of reconstitution of a partnership firm.

2025: 22 May Shift 1

Partner's current accounts are transferred to the respective partners' ________ at the time of dissolution of a partnership.

2026: 19 May Shift 1

Profit & Loss Adjustment A/c is not prepared in which of the following case?

2026: 13 May Shift 1

The amount of sundry assets transferred to Realization account was Rs. 3,60,000; 50% of these have been sold at a profit of Rs. 75,000; 30% of the remaining assets were sold at a discount of 12% and remaining were taken over by Raman (a partner) at 25% above book value. At what value were the assets taken over by Raman :-

On the dissolution of a firm, the Creditors are transferred to :

Solution

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