A & B were partners in a partnership firm. Due to the ill health of B they decided to dissolve the firm. The position of assets and liabilities on the date of dissolution was:

It was agreed that following transactions will take place:

a) A wanted to start the business in sole proprietorship so he took building and furniture at 10% less than book value.
b) All the debtors proved good except a person C who did not pay ₹10,000

The treatment of goodwill appearing in the balance sheet will be:

Transferred to Debit of Realisation A/c

The correct answer is option 1- Transferred to Debit of Realisation A/c.

As all Intangible or fixed assets are transferred to debit side of Realisation account. Goodwill is an intangible asset, so it is transferred to debit side of Realisation account.