Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Dissolution of Partnership Firm

Question:

What is the journal entry at the time of dissolution of partnership firm if realisation expenses of ₹7500 were borne by firm but paid by partner Ajay?

Options:

Realisation A/c Dr.            ₹7500
   To Ajay’s Capital A/c             ₹7500
(Realisation expenses paid by partner)

Ajay’s Capital A/c  Dr.   ₹7500
   To Realisation A/c                      ₹7500
(Realisation expenses paid by partner)

No entry passed

Revaluation A/c Dr.            ₹7500
   To Ajay’s Capital A/c             ₹7500
(Realisation expenses paid by partner)

Correct Answer:

Realisation A/c Dr.            ₹7500
   To Ajay’s Capital A/c             ₹7500
(Realisation expenses paid by partner)

Explanation:

The expenses of dissolution are borne by the firm but paid by the partner on behalf of firm. Therefore, Ajay's capital account is credited.