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At the time of dissolution of a firm, which of the following payments is not treated as a realisation expense?

Answer and explanation

Correct answer: Payment for a partner’s personal purchase

Realisation expenses are incurred to sell the firm’s assets or settle its liabilities. Auction charges, legal charges and transport expenses are directly connected with this process. A payment for a partner’s personal purchase is unrelated to the dissolution of the firm, so it is not treated as a realisation expense. Exam tip: identify whether the expense is directly connected with asset realisation or liability settlement.

Related tags

Partnership DissolutionRealisation ExpensesAccounting TreatmentPartnership AccountsClass 12 AccountancyClosing The BusinessDissolution Of A Partnership FirmAccountancy

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