Accountancy Part ADissolution of Partnership Firm

Identify the item credited to Realisation Account in the event of dis…

Identify the item credited to Realisation Account in the event of dissolution of a partnership firm.

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → Provision for doubtful debts

On dissolution, debtors are sent to the debit side of the Realisation Account at their gross value. The provision for doubtful debts against them is a credit balance, so it is closed by transfer to the credit side of the Realisation Account along with the outside liabilities.

Option (2) Gross value of debtors — Incorrect. Debtors are an asset and go to the debit side.
Option (3) Realisation expenses — Incorrect. Expenses paid by the firm on realisation are debited to the Realisation Account.
Option (4) Payment of unrecorded liability — Incorrect. Paying a liability that was not in the books is a loss to the firm, so it is debited to the Realisation Account.

NCERT (2026-27 edition):
For transfer of assets – “All asset accounts excluding cash, bank and the fictitious assets, if any are closed by transfer to the debit of Realisation Account at their book values. It may be noted that sundry debtors are transferred at gross value and the provision for doubtful debts is transferred to the credit side of Realisation Account along with liabilities.”