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Subjects
Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessEasy
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At the time of dissolution of a partnership firm, which entry is made when liabilities are transferred to the Realisation Account?

Answer and explanation

Correct answer: Realisation Account credited

At dissolution, all external liabilities are transferred to the Realisation Account. The journal entry is: the concerned liability account is debited and the Realisation Account is credited. Therefore, the Realisation Account is credited. It is debited when assets are transferred, not when liabilities are transferred. Exam tip: Assets are transferred to the debit side and liabilities to the credit side of the Realisation Account.

Related tags

Partnership DissolutionRealisation AccountLiabilitiesAccounting EntriesClosing BusinessClosing The BusinessDissolution Of A Partnership FirmAccountancy
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10 more MCQs
  1. 1What is the process of permanently closing a partnership firm and ending its existence called?
  2. 2Which account is prepared at the time of dissolution of a firm to determine the profit or loss arising from the settlement of its assets and external liabilities?
  3. 3What is generally done with the assets of a partnership firm at the time of its dissolution?
  4. 4On dissolution of a partnership firm, from what are the external liabilities generally paid?
  5. 5To which account is the realisation profit transferred?
  6. 6To which account is the realisation loss transferred?
  7. 7What happens to the existence of the firm after dissolution?
  8. 8Dissolution expenses are generally debited to which account?
  9. 9At the time of dissolution, if an asset is sold for ₹10,000, what amount will be credited to the Realisation Account?
  10. 10On dissolution of a firm, to whom is the final cash balance paid after settling outside liabilities and other amounts due?
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