If the realisation expenses are paid by the firm, what will be the effect of the accounting entry?

Correct answer: Realisation Account will be debited

When the firm itself pays the realisation expenses, the Realisation Account is debited and the Cash/Bank Account is credited. Such expenses relate to the process of realising assets and settling liabilities, so they are recorded as a loss in the Realisation Account. The partners’ Capital Accounts are not debited directly. Exam tip: For expenses paid by the firm, remember the entry: ‘Realisation Account Dr. To Cash/Bank Account.’