In a firm, A and B were sharing profits and losses in a ratio of 3:2. At the time of dissolution, the balance of the Deferred Revenue Expenditure Account was ₹50,000. How will it be treated?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- Debited to Partner's Capital Account.
Deferred Revenue Expenditure is a fictitious asset which is to be transferred (debited) to Partner's Capital Account as it makes the decrease in the capital accounts of partner. Journal entry for this-
A's Capital A/c Dr. 30,000
B's Capital A/c Dr. 20,000
To Deferred Revenue Expenditure A/c 50,000
(Distributed in old ratio 3:2)