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Subjects
Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessHard
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At the time of dissolution of a partnership firm, realisation expenses of ₹3,000 are paid through the bank. What amount will be recorded in the Realisation Account?

Answer and explanation

Correct answer: Debit ₹3,000

Realisation expenses are costs incurred for settling or disposing of the firm’s assets, so ₹3,000 is debited to the Realisation Account. The journal entry is: Realisation Account Dr. ₹3,000; To Bank Account ₹3,000. Therefore, crediting ₹3,000 is incorrect. Exam tip: Expenses related to realisation are generally recorded on the debit side of the Realisation Account.

Related tags

Partnership DissolutionRealisation AccountRealisation ExpensesClosing BusinessAccounting EntriesClosing 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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