On the dissolution of a firm, creditors is transferred to:

On dissolution of a partnership firm, all assets (except cash and bank) and all external liabilities are transferred to the Realisation Account. Since creditors represent an external liability of the firm, they are transferred to the Realisation Account.

The journal entry for this transfer is:

Creditors A/c Dr.

To Realisation A/c

This entry records the liability that needs to be settled during the dissolution process. The creditors appear on the credit side of the Realisation Account, indicating that the firm is liable to pay this amount.

Subsequently, when the creditors are actually paid off during dissolution, the entry will be:

Realisation A/c Dr.

To Cash/Bank A/c

The Realisation Account serves as a summary account that collects all assets to be realized and all liabilities to be paid off (excluding partners' capital accounts and cash/bank balances). This helps in determining the profit or loss on realization, which is then distributed among the partners in their profit-sharing ratio.

Cash Account and Bank Account are not closed or transferred during dissolution as they are used to make payments. Partners' Capital Accounts are also kept separate as they represent the partners' claims and are settled after all assets are realized and liabilities are paid.