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Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessExpert
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A partner paid realisation expenses of ₹5,000 on behalf of the firm, and the firm reimbursed the partner. In the Realisation Account, on which side and for what amount will the entry be recorded?

Answer and explanation

Correct answer: डेबिट ₹5,000

Realisation expenses are costs incurred in closing the firm, so they are debited to the Realisation Account. The amount is ₹5,000. The usual entry is: Realisation Account Dr. ₹5,000 To Partner’s Capital/Current Account or Bank Account, depending on the settlement method. Crediting the Realisation Account would be incorrect because an expense increases its debit side. Exam tip: Debit the Realisation Account with actual expenses incurred for dissolution.

Related tags

Partnership DissolutionRealisation AccountRealisation ExpensesAccounting EntriesPartner ReimbursementClosing 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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