Which account is generally prepared first in the accounting process of dissolving a partnership firm?

Correct answer: Realisation Account

On dissolution, the assets and liabilities are first transferred to the Realisation Account. This account records the sale of assets, payment of liabilities, and the resulting profit or loss on realisation. Partners’ capital accounts are generally settled after this profit or loss has been determined, so the Capital Account is not the first account prepared. Exam tip: remember that the transfer of assets and liabilities marks the beginning of the realisation process.