Question

On the dissolution of a firm, partner’s loan account appearing on the Assets side of

the Balance sheet is transferred to :

A Debit side of the cash book B Credit side of the cash book

C Debit side of partner’s capital account

D Credit side of partner’s capital account​

Answer 1

Answer:

On dissolution, the books of the firm are to be closed. Dissolution process starts by opening the following accounts in the firm’s books:

Realisation Account,

Partner’s Loan Account,

Partners’ Capital Accounts,

Bank or Cash Account.

1] Realisation Account

The object of preparing Realisation account is to close the books of accounts of the dissolved firm and to determine profit or loss on the Realisation of assets and payment of liabilities. It is prepared by:

Transferring all the assets except Cash or Bank Account to the debit side of the account.

Transferring all the liabilities except Partner’s Loan Account and Partners’ Capital Accounts to the credit side of the account.

Crediting the Receipt on the sale of assets to the account.

Debiting the payment of Liabilities to the account.

Debiting the dissolution expenses of the