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On dissolution of a partnership firm, the final payment to partners is determined on the basis of the balance in which account?

Answer and explanation

Correct answer: Cash Account

After paying external liabilities and partners’ loans, the amount available for settling the partners’ final capital balances is shown by the Cash Account balance. The Sales, Purchase and Salary Accounts do not determine the cash available for this final settlement. Exam tip: In dissolution questions, check the closing Cash Account after all receipts and payments have been recorded.

Related tags

Partnership DissolutionCash AccountFinal PaymentSettlement Of PartnersAccounting BasicsClosing The BusinessDissolution Of A Partnership FirmAccountancy

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