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JAMB Principles of Accounts 2014 Question 42

Question 42

Partnership Admission, Retirement and Dissolution

Where partnership is converted into a limited liability company, current account balances of partners are transferred to a

  1. A.realization account.
  2. B.savings account.
  3. C.share capital account.
  4. D.capital account.
Show the answer and explanation

Answer: D (capital account.)

Explanation

Each partner's current account balance is moved to his capital account, which is then settled with shares or cash.