Question:
When realisation expenses are paid by a partner on behalf of the firm, then :
When realisation expenses are paid by a partner on behalf of the firm, then :
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If a partner pays realisation expenses for the firm, his capital account is credited.
Updated On: Jul 4, 2025
- Realisation A/c is debited
- Cash A/c is credited
- Partner’s Capital A/c is debited
- Partner’s Capital A/c is credited
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The Correct Option is D
Solution and Explanation
When dissolution takes place, realisation expenses are incurred by the firm to close the books and dispose of assets and liabilities. If a partner pays such expenses from his personal resources on behalf of the firm, the firm does not need to pay from its cash/bank balance.
In this case, the partner is effectively contributing that amount to the firm, and thus his capital account is credited to reflect the payment made on behalf of the firm.
Journal Entry:
Realisation A/c Dr.\hspace{1cm}To Partner’s Capital A/c
In this case, the partner is effectively contributing that amount to the firm, and thus his capital account is credited to reflect the payment made on behalf of the firm.
Journal Entry:
Realisation A/c Dr.\hspace{1cm}To Partner’s Capital A/c
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