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If a partner personally pays the realisation expenses and does not claim reimbursement from the firm, what will be the effect on the firm's books?

Answer and explanation

Correct answer: No expense will be recorded in the Realisation Account

When a partner bears the realisation expenses personally and does not seek reimbursement, the firm neither incurs an expense nor makes a cash payment. Therefore, no entry is made in the Realisation Account. Option C would apply only if the firm itself paid the expenses. Exam tip: if reimbursement is payable, debit the Realisation Account and credit the partner's account; if there is no reimbursement, no entry is recorded.

Related tags

Partnership DissolutionRealisation AccountRealisation ExpensesClosing EntriesClosing The BusinessDissolution Of A Partnership FirmAccountancyClass 12 Mcq

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