Question

A firm is dissolved, Param, a partner, is to carry out dissolution for which he will get ₹ 5,000, including expenses. Realisation Expenses were ₹ 2,500. The Realisation Account will be debited by ______.

Options

• ₹ 5,000

• ₹ 2,500

• ₹ 7,500

• None of these.

Answer 1

A firm is dissolved, Param, a partner, is to carry out dissolution for which he will get ₹ 5,000, including expenses. Realisation Expenses were ₹ 2,500. The Realisation Account will be debited by ₹ 5,000.

Explanation:

When a partner takes a fixed remuneration that includes expenses, that agreed amount is the only cost the firm will record. The actual expense of ₹ 2,500 is Param’s personal responsibility and does not affect the firm’s ledgers. Therefore, the firm completely ignores the actual expense and debits the Realisation Account by exactly ₹ 5,000.