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Subjects
Class 12AccountancyDissolution of a Partnership FirmRealisation AccountMedium
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At the dissolution of a firm, how is the bank overdraft treated in the Realisation Account?

Answer and explanation

Correct answer: Credited as a liability

A bank overdraft is an external liability of the firm. Therefore, on dissolution, it is transferred to the Realisation Account and recorded on its credit side as a liability. Treating it as an asset and debiting it is incorrect. Exam tip: external liabilities are transferred by the entry—Liability A/c Dr. to Realisation A/c.

Related tags

AccountancyPartnership DissolutionRealisation AccountBank OverdraftExternal LiabilitiesDissolution Of A Partnership FirmClass 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, how is the goodwill appearing in the books recorded in the Realisation Account?
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