If expenses of realisation are paid by the firm in the process of realisation of assets and liability then expenses will be debited to:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Realisation A/c
Expenses of realisation paid by the firm are a cost of winding up, so they reduce the profit on realisation. The entry is Realisation A/c Dr. To Bank A/c.
Option (2) Partner's Capital A/c — Incorrect. A capital account is debited only when the firm pays an expense on behalf of a partner who has to bear it.
Option (3) Partner's Loan A/c — Incorrect. A loan account is never used for realisation expenses.
Option (4) Bank A/c — Incorrect. Bank is credited, since the money goes out.
NCERT (2026-27 edition):
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