The firm pay realisation expenses of ₹10000 on behalf of Rohit, a partner with whom it was agreed at ₹25000. Realisation expenses came to ₹35000. Realisation Account will be debited by:
Answer & explanation
Correct answer: option 4
For payment of realisation expenses-
(a) When some expenses are incurred and paid by the firm in the process of realisation of assets and payment of liabilities:
Realisation A/c Dr.
To Bank A/c
(b) When realisation expenses are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(c) 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 Note: In the absence of information about who is paying the expenses, it is implied that expenses are paid by the partner who has agreed to bear expenses.
* For agreed remuneration to such partner who agrees to undertake the dissolution work.-
Realisation A/c Dr.
To Partner’s Capital A/c