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On dissolution of a firm, bank overdraft is transferred to:
- a)Cash Account
- b)Bank Account
- c)Realisation Account
- d)Partner’s Capital Account
Correct answer is option 'C'. Can you explain this answer?
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On dissolution of a firm, bank overdraft is transferred to:a)Cash Acco...
Bank over draft is a liability so transfer to Realisation account.
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On dissolution of a firm, bank overdraft is transferred to:a)Cash Acco...
Realisation Account:
Bank overdraft is a liability of the firm, and on dissolution, this liability needs to be settled. The bank overdraft is transferred to the Realisation Account during the dissolution process. The Realisation Account is used to record all the assets, liabilities, and expenses related to the dissolution of the firm.
Explanation:
- When a firm is dissolved, its assets are realized, and liabilities are settled. The Realisation Account is prepared to determine the amount available for distribution among the partners.
- The bank overdraft is considered a liability of the firm because it represents the amount owed to the bank. This liability needs to be settled before distributing the remaining assets to the partners.
- By transferring the bank overdraft to the Realisation Account, the firm ensures that all liabilities are accounted for and settled properly during the dissolution process.
- The Realisation Account helps in calculating the net amount available for distribution among the partners after settling all the liabilities of the firm.
Conclusion:
In conclusion, on dissolution of a firm, the bank overdraft is transferred to the Realisation Account to ensure that all liabilities are accounted for and settled before the remaining assets are distributed among the partners. This process helps in the smooth winding up of the firm and ensures that all financial obligations are met.
Bank overdraft is a liability of the firm, and on dissolution, this liability needs to be settled. The bank overdraft is transferred to the Realisation Account during the dissolution process. The Realisation Account is used to record all the assets, liabilities, and expenses related to the dissolution of the firm.
Explanation:
- When a firm is dissolved, its assets are realized, and liabilities are settled. The Realisation Account is prepared to determine the amount available for distribution among the partners.
- The bank overdraft is considered a liability of the firm because it represents the amount owed to the bank. This liability needs to be settled before distributing the remaining assets to the partners.
- By transferring the bank overdraft to the Realisation Account, the firm ensures that all liabilities are accounted for and settled properly during the dissolution process.
- The Realisation Account helps in calculating the net amount available for distribution among the partners after settling all the liabilities of the firm.
Conclusion:
In conclusion, on dissolution of a firm, the bank overdraft is transferred to the Realisation Account to ensure that all liabilities are accounted for and settled before the remaining assets are distributed among the partners. This process helps in the smooth winding up of the firm and ensures that all financial obligations are met.
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On dissolution of a firm, bank overdraft is transferred to:a)Cash Accountb)Bank Accountc)Realisation Accountd)Partner’s Capital AccountCorrect answer is option 'C'. Can you explain this answer?
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