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At the dissolution of a partnership firm, after paying liabilities and dissolution expenses, the remaining final cash is ultimately related to the settlement of which account?

Answer and explanation

Correct answer: Capital Accounts

After liabilities and dissolution expenses are paid, the remaining cash is distributed to the partners according to the balances in their capital accounts. Therefore, the final settlement of cash is related to the Capital Accounts. Sales, Purchases and Stock Accounts relate to regular business operations, not the final distribution on dissolution. Exam tip: The surplus cash remaining at the end of dissolution is used to settle the partners’ capital accounts.

Related tags

Partnership DissolutionCapital AccountsFinal Cash DistributionClosing BusinessAccountancy Class 12Closing The BusinessDissolution Of A Partnership FirmAccountancy

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