Identify the steps involved in the accounting treatment in the case of dissolution of a firm:(A) Capital accounts of partners are prepared and their final settlement is done.(B) The balance of realisation account (profit or loss on realization) is transferred to partners' capital accounts in the profit sharing ratio.(C) All assets and all external liabilities are transferred to the realisation account.(D) Realisation account is prepared.(E) Bank account is prepared.Choose the correct answer from the options given below:
- A(A), (B), (C), (D), (E)
- B(D), (C), (B), (A), (E)
- C(A), (D), (B), (E), (C)
- D(D), (B), (C), (A), (E)
Solution & Step-by-step Explanation
Looking at the structure of the options, we evaluate the layout starting from step (D) "Realisation account is prepared":First, the Realisation account structure is opened/prepared (D).Inside it, we transfer all balance sheet asset books and third party liability records (C).Once liquidation entries close, the computed profit or loss balance is moved to partner capitals (B).After updating capitals, partners' final settlement payout calculations run (A).Finally, the Cash/Bank account is completed to show a zero balance (E).Hence, the sequence is (D), (C), (B), (A), (E).