At the time of dissolution of a partnership firm, the final adjustment in the partners’ capital accounts is made for which item?

Correct answer: Profit or loss on realisation

During dissolution, the profit or loss on realisation is determined from the sale of assets and settlement of liabilities. This profit or loss is transferred to the partners’ capital accounts in their profit-sharing ratio, making option A correct. Sales tax, purchase of goods and salary payment are individual transactions, not the final adjustment of capital accounts. Exam tip: Remember that the realisation account’s profit or loss is ultimately transferred to the partners’ capital accounts.