Rahul, a partner, decided to pay off a creditor of ₹50,000 at the time of dissolution. Entry to be passed will be:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Realisation A/c Dr. ₹50,000 To Rahul’s Capital A/c ₹50,000
At dissolution all outside liabilities are transferred to the credit of the Realisation Account. When a partner pays a liability himself, the firm’s cash is not used: the Realisation Account is debited (the liability is settled) and the partner’s capital account is credited, because the firm now owes him that amount.
Entry:
Realisation A/c Dr. ₹50,000
To Rahul’s Capital A/c ₹50,000
Note: NTA dropped this question. For the benefit of students and to give them additional practice, the question has been suitably modified so that it has one clear answer.
NCERT (2026-27 edition):
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