Question

Aman, a partner, is to bear all the expenses on realisation for which he is to be paid Rs 2,000. Aman has to pay realisation expenses of Rs 2,500. How much amount will be debited to realisation account?

• A. Rs 2,000
• B. Rs 2,500
• C. Rs 500
• D. Rs 4,500

Hint:

Only the amount agreed upon and reimbursed by the firm is debited to the realization account. Personal expenses of partners are excluded from firm accounts.

Answer 1

The Correct Option is A

The realization account is used to record the actual expenses incurred by the firm during the process of dissolution. Since Aman agreed to bear the expenses and be reimbursed Rs 2,000, this is the amount the firm recognizes as realisation expenses (debited to realization account). The excess Rs 500 paid by Aman personally is not recorded in the firm's books and is a personal expense of Aman, thus not debited to the realization account.