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If a partner pays the realisation expenses from personal funds and does not claim reimbursement from the firm, which entry will be passed in the firm’s books?

Answer and explanation

Correct answer: No entry will be passed

When a partner bears the realisation expenses from personal funds and does not seek reimbursement, the firm records neither an expense nor any liability to the partner. Hence, no entry is passed in the firm’s books. Option A would be appropriate only when the firm bears or pays the expense. Exam tip: For realisation expenses, first identify who ultimately bears the cost—the firm or the partner personally.

Related tags

Realisation ExpensesDissolution EntriesPartnership AccountsAccounting TreatmentClosing The BusinessDissolution Of A Partnership FirmAccountancyClass 12 Mcq

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