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What is the usual accounting treatment of realisation expenses on the dissolution of a firm?

Answer and explanation

Correct answer: Debited to Realisation Account

When the firm bears the realisation expenses, they are debited to the Realisation Account and Cash or Bank Account is credited. This reduces the realisation profit or increases the realisation loss. Option A is incorrect because crediting an expense to the Realisation Account would increase income. Exam tip: remember the basic entry as ‘Realisation Account Dr. to Cash/Bank’.

Related tags

Dissolution Of PartnershipRealisation AccountRealisation ExpensesPartnership AccountingClass 12 AccountancyDissolution Of A Partnership FirmAccountancyClass 12 Mcq

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