On 1/4/22, X and Y decided to dissolve their firm. On that date of dissolution,Goodwill appeared at ₹5,00,000 in the Balance Sheet. Goodwill will be:

Transferred to the debit side of realisation A/C

When the firm is dissolved, its books of account are to be closed and the profit or loss arising on realisation of its assets and discharge of liabilities is to be computed. For this purpose, a Realisation Account is prepared to ascertain the net effect (profit or loss) of realisation of assets and payment of liabilities which may be is transferred to partner’s capital accounts in their profit sharing ratio. Hence, all assets (other than cash in hand bank balance and fictitious assets, if any), and all external liabilities are transferred to this account.