Aman and Mohan, partners of a firm decided to dissolve the business on 31-03-22. The firm decided to pay realisation expenses of ₹1,000 on behalf of Mohan. ₹1,000 will be debited to:
Answer & explanation
Correct answer: option 2
The correct answer is option 2- Mohan's Capital A/c.
For payment of realisation expenses- When a partner has agreed to bear the realisation expenses:
(i) if payment of realisation expenses is made by the firm
Partner’s Capital A/c Dr.
To Bank A/c
(ii) if the partner himself pays the realisation expenses, no entry is required.
Thus, here firm paid the expenses which are to be borne by the partner. So, journal entry will be-
Mohan's Capital A/c Dr. 1,000
To Bank A/c 1,000