When realisation expenses are paid by the firm on behalf of a partner, which account will be debited:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Partner's Capital Account.
When realisation expenses are paid by the firm on behalf of a partner, Partner's Capital Account will be debited.
When the Realisation Expenses paid on behalf of partner by firm, the following journal entry is passed-
Partner's capital A/c Dr.
To cash A/c.
This journal entry shows that the on behalf of partner, the firm had paid the realisation expenses due to which their account is debited with the amount of realisation expenses. By debiting the partner capital account, their capital balance decreases.