Ram, a partner, has been assigned the responsibility for realization of assets and settlement of liability for which he will be given remuneration of ₹10,000. He has to bear all the realization expenses. Actual realization expenses are ₹12,000. Journal Entry will be-
Answer & explanation
Correct answer: option 1
The correct answer is option 1-
Realisation A/c.....Dr. ₹10,000
To Ram's Capital A/c ₹10,000.
Ram is responsible for realising assets, paying liabilities and bearing all realization expenses. He will be paid ₹10,000 as remuneration. The actual realization expenses are ₹12,000, but Ram bears them. So, accounting treatment for the remuneration to Ram is as follows-
It's an expense of realization, it is debited to Realisation A/c and it is credited to Ram's Capital A/c, since it’s payable to him (not paid via bank). Journal Entry for this-
Realisation A/c Dr. 10,000
To Ram’s Capital A/c 10,000