Question

On dissolution of a firm, bank overdraft is transferred to

• A. Realisation Account
• B. Bank Account
• C. Partners Capital Account
• D. Partners Loan Account

Answer 1

The Correct Option is B

When a firm is dissolved, all its assets and liabilities are settled. The bank overdraft, being a liability, needs to be resolved. Here's how the process works: 

During dissolution, all outstanding liabilities are paid off using available funds, and any remaining assets are realized to cover liabilities.

The Realisation Account is used to track the sale of assets and settlement of liabilities but is not typically where liabilities like a bank overdraft are transferred.

Liabilities such as a bank overdraft should be settled directly through the Bank Account in the firm's records. 

Conclusion: The bank overdraft is transferred to the Bank Account during the dissolution process, as all liabilities must be cleared through this account to settle them effectively.

Therefore, the correct option is: Bank Account.

Answer 2

During the dissolution of a partnership firm, all assets and liabilities are transferred to the Realisation Account. However, the bank overdraft, being a liability of the firm, is usually cleared by the bank, and as part of the dissolution process, the bank overdraft is transferred to the Bank Account.

The other options are incorrect because:

• The Realisation Account: is used to record the sale of assets and settlement of liabilities, but the overdraft itself is a liability that will be paid off directly from the Bank Account.
• The Partners’ Capital Account: is used to settle the final balances of the partners after the firm’s liabilities are settled.
• The Partners’ Loan Account: is not typically used for overdraft transactions.

Thus, the correct answer is: Bank Account