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Subjects
Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessMedium
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When a bank loan is paid off at the time of dissolution, which account is debited?

Answer and explanation

Correct answer: Bank Loan Account

A bank loan is a liability. When it is paid, the liability is reduced and the Bank Loan Account is debited, while the Cash or Bank Account is credited with the amount paid. Therefore, the Bank Loan Account is correct. Exam tip: on settlement of a liability, debit the liability account and credit the account from which payment is made.

Related tags

Dissolution Of PartnershipBank Loan SettlementRealization AccountLiability AccountingJournal EntriesClass 12 AccountancyClosing The BusinessDissolution Of A Partnership Firm
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10 more MCQs
  1. 1What is the process of permanently closing a partnership firm and ending its existence called?
  2. 2Which account is prepared at the time of dissolution of a firm to determine the profit or loss arising from the settlement of its assets and external liabilities?
  3. 3What is generally done with the assets of a partnership firm at the time of its dissolution?
  4. 4On dissolution of a partnership firm, from what are the external liabilities generally paid?
  5. 5To which account is the realisation profit transferred?
  6. 6To which account is the realisation loss transferred?
  7. 7What happens to the existence of the firm after dissolution?
  8. 8Dissolution expenses are generally debited to which account?
  9. 9At the time of dissolution, if an asset is sold for ₹10,000, what amount will be credited to the Realisation Account?
  10. 10On dissolution of a firm, to whom is the final cash balance paid after settling outside liabilities and other amounts due?
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