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Class 12AccountancyDissolution of a Partnership FirmRealisation AccountEasy
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At the time of dissolution, how is the goodwill appearing in the books recorded in the Realisation Account?

Answer and explanation

Correct answer: On the debit side of the Realisation Account

At dissolution, goodwill appearing in the books is a non-cash asset, so its book value is transferred to the debit side of the Realisation Account. If it is sold, the sale proceeds are recorded on the credit side of the Realisation Account. Therefore, crediting goodwill itself is not the correct treatment. Exam tip: Assets transferred to the Realisation Account are debited, whereas liabilities transferred to it are credited.

Related tags

Partnership DissolutionRealisation AccountGoodwill TreatmentAccounting EntriesClass 12 AccountancyDissolution Of A Partnership FirmAccountancyClass 12 Mcq
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10 more MCQs
  1. 1What is the main purpose of Realisation Account on dissolution of a firm?
  2. 2For what purpose is the Realisation Account prepared on the dissolution of a partnership firm?
  3. 3At the time of dissolution of a partnership firm, to which account are the real (non-cash) assets and external liabilities transferred?
  4. 4At what value are the assets of a partnership firm transferred to the Realisation Account?
  5. 5On which side is profit shown in the Realisation Account?
  6. 6On which side is a loss shown in the Realisation Account?
  7. 7At the time of dissolution of a partnership firm, on which side of the Realisation Account are the proceeds from the sale of assets recorded?
  8. 8On dissolution of a partnership firm, on which side of the Realisation Account is the payment of liabilities recorded?
  9. 9What type of account is a Realisation Account?
  10. 10At the time of dissolution of a partnership firm, when an asset is sold for cash, on which side of which account is the sale proceeds recorded?
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