Which of the following is written on the credit side of realisation account at the time of dissolution of partnership firm?

1) Sundry creditors
2) Bills payables
3) Furniture and Fittings
4) Bank overdraft
5) Provision for doubtful debts
6) Sale of assets
7) Payment of liabilities
8) Liability assumed by the partner
9) Profit transferred to partners capital account’s in their profit sharing ratio

Choose the correct answer from the options given below.

1, 2, 4, 5, 6

The correct answer is option 3- 1, 2, 4, 5, 6.

When a firm undergoes dissolution, it is necessary to close its books of account and calculate the profit or loss resulting from the sale of assets and settlement of liabilities. To achieve this, a Realisation Account is prepared, which helps determine the net effect (whether there is a profit or loss) arising from the realization of assets and payment of liabilities. The Realisation Account is an account where all assets (excluding cash in hand, bank balance, and fictitious assets, if any) and external liabilities are transferred. The Realisation Account also records the proceeds from the sale of assets, the settlement of liabilities, and any expenses incurred during the process of realization. The final balance in this account represents the profit or loss on realization, which is then transferred to the partners' capital accounts based on their profit sharing ratio. This ensures that the partners receive their share of the realized profit or bear the loss in proportion to their agreed profit distribution.

All assets are transferred to debit side and their realised amount on the credit side. Liabilities are recorded on credit side and their payment is recorded on the debit side of the account.

1) Sundry creditors- It is a liability and transferred to credit side of realisation account.

2) Bills payables- It is a liability and transferred to credit side of realisation account.

3) Furniture and Fittings- It is an asset and transferred to debit side of realisation account.

4) Bank overdraft- It is a liability and transferred to credit side of realisation account.

5) Provision for doubtful debts- It is a liability and transferred to credit side of realisation account.

6 ) Sale of assets- Assets are sold and cash realised, assets are already transferred to realisation account. So, sale of assets are transferred to credit side of realisation account.

7) Payment of liabilities- Liabilities are paid off, liabilities are already transferred to realisation account. So, payment of liabilities are transferred to debit side of realisation account.

8) Liability assumed by the partner- The liability which is assumed by the partner. The journal made for this- Realisation a/c To Partner's Capital A/c. So, realisation account is debited.

9) Profit transferred to partners capital account’s in their profit sharing ratio- The profit of the realisation account is credited to partners account in their profit sharing ratio. So, realisation account is debited.