Where will the realisation expenses be debited, when such realisation expenses are paid by the firm on behalf of a partner at the time of dissolution of the partnership firm?
Answer & explanation
Correct answer: option 2
(a) When some expenses are incurred and paid by the firm in the process of realisation of assets and payment of liabilities:
Realisation A/c Dr.
To Bank A/c
(b) When realisation expenses are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(c) When a partner has agreed to bear the realisation expenses:
(i) if payment of realisation 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.