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
The expenses are Mohan’s own burden, which the firm pays for him. The firm’s cash goes out on his behalf, so the amount is charged to him: Mohan’s Capital A/c Dr. To Bank A/c. It is not a loss of the firm, so the Realisation Account is not touched.
Why the other options are incorrect
Option (1) Realisation A/c — Incorrect. Realisation expenses are debited to the Realisation Account only when the firm itself bears them.
Option (3) Bank A/c — Incorrect. The payment is made from the bank, so Bank Account is credited, not debited.
Option (4) Aman Capital's A/c — Incorrect. The expenses were paid for Mohan, not for Aman.
NCERT (2026-27 edition):
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