At the time of dissolution of their firm, Ahmed and Subhash, who are partners of that firm, agreed that Ahmed will pay realization expenses for a fixed remuneration of Rs.12,000. The actual expenses were Rs. 16,000. The Journal entry to be passed is
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Realisation A/c Dr 12,000 To Ahmed Capital A/c 12,000
Ahmed has agreed to carry out the dissolution and to bear the realisation expenses in return for a fixed remuneration. Two things follow:
The remuneration of Rs. 12,000 is the firm's realisation expense. It is debited to Realisation Account and credited to Ahmed's Capital Account.
The actual expenses of Rs. 16,000 are Ahmed's own burden, because he has agreed to bear them. Since he pays them himself, no entry is passed in the firm's books for them.
So only the remuneration is recorded: Realisation A/c Dr. Rs. 12,000, To Ahmed's Capital A/c Rs. 12,000. Recording the Rs. 16,000 (or a payment of Rs. 12,000 through the bank) would charge the firm with a cost that Ahmed has taken upon himself.
NCERT (2026-27 edition):
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