What is the journal entry at the time of dissolution of partnership firm, if realisation expenses of ₹7,500 were to be borne by firm but paid by partner Ajay?
Answer & explanation
Correct answer: option 1
The correct answer is option 1-
Realisation A/c Dr. ₹7500
To Ajay’s Capital A/c ₹7500
(Realisation expenses paid by partner)
When realisation expenses are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c.
Partner's account is credited as Expenses are paid by a partner which have to be paid back by the firm to the partner. Crediting her account will increase their balance. So, the correct journal entry will be-
Realisation A/c Dr. ₹7,500 To Ajay's Capital A/c ₹7,500.