On dissolution of the firm, partner's capital accounts are closed through-

On dissolution of a partnership firm, the partner's capital accounts are closed through Bank Account.

During the dissolution process, the Realisation Account is prepared to record the disposal of assets and settlement of liabilities. The profit or loss on realisation is then transferred to the partners' capital accounts in their profit-sharing ratio.

After all adjustments are made, each partner's capital account will show either:

• A credit balance → Amount due to the partner
• A debit balance → Amount due from the partner

These final balances are settled through actual cash/bank transactions:

If capital account has credit balance:

Partner's Capital A/c ... Dr

To Bank A/c

(Amount paid to partner)

If capital account has debit balance:

Bank A/c ... Dr

To Partner's Capital A/c

(Amount received from partner)

The Realisation Account is used to close asset and liability accounts, not capital accounts. The Bank Account represents the actual cash settlement that closes each partner's capital account, making it the final closing account in the dissolution process.