What is the journal entry if at the time of dissolution, realisation expenses are borne and paid by the partner?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- No entry.
No entry is passed, if at the time of dissolution, realisation expenses are borne and paid by the partner.
When a partner has agreed to bear the realisation expenses, the following journal entry is passed:
(i) if payment of realization 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.