On the dissolution of a firm, realisation account is debited with which of the following?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- All assets to be realised.
* All assets to be realised- The assets are transferred to the debit side of realisation account. Journal entry made to this- Realisation A/c To Assets A/c.
* All outside liabilities of the firm- All the liabilities are to be transferred to the credit side of the realisation A/c. Journal entry made to this- Liabilities A/c To Realisation A/c.
* Cash received on sale of assets- The assets which were transferred to the debit side of realisation account, gets transferred to credit side of realisation account on sale. Journal entry made to this- Cash A/c To Realisation A/c.
* Any asset taken over by one of the partners- Any asset which is taken over by the partner decreases the capital balance of partner. Journal entry for this- Partner's Capital A/c Dr. To Realisation A/c.