The transactions relating to liquidation in partnership account is drawn by using?

A. current account
B. cash account
C. capital account
D. realization account

Correct Answer:

Option C – capital account

Explanation

If the partnership decides to liquidate, the assets of the partnership are sold, liabilities are paid off, and any remaining cash is distributed to the partners according to their capital account balances. If a partner’s capital account has a deficit balance, that partner should contribute the amount of the deficit to the partnership.