On dissolution of a firm, which accounts are ultimately closed with a zero balance after realising assets and settling liabilities?

Correct answer: Realisation Account and Partners’ Capital Accounts

The Realisation Account records the profit or loss arising from the sale of assets and settlement of liabilities. After this profit or loss is transferred to the partners’ Capital Accounts, the Realisation Account closes with a zero balance. The partners’ Capital Accounts also become zero after the final payment to, or contribution by, the partners. Therefore, both accounts are ultimately closed. Exam tip: remember that the realisation profit or loss is transferred to the partners’ Capital Accounts before the Realisation Account is closed.