In case of dissolution of a firm, if a partner has agreed to bear the realisation expenses and payment is made by the firm, the correct journal entry would be:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Partner’s Capital A/c is debited and Bank A/c is credited
The partner has agreed to bear the realisation expenses, so they are his burden, not the firm’s. When the firm pays them, cash goes out on his behalf, and his capital account is debited. The Realisation Account is not touched.
Partner’s Capital A/c Dr.
To Bank A/c
Had the partner paid the expenses himself, no entry would be needed at all.
NCERT (2026-27 edition):
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