Question

On dissolution of a firm, an unrecorded furniture of ₹ 5,000 was taken by a partner for ₹ 4,300 against payment. Which Account will be debited and by how much amount?

Options

• Cash Account by ₹ 4,300

• Realisation Account by ₹ 700

• Partner’s Capital Account by ₹ 5,000

• Realisation Account by ₹ 4,300

Answer 1

Cash Account by ₹ 4,300

Explanation:

The key phrase in this question is “against payment”, which means the partner paid immediate cash (or a cheque) to the firm to buy this unrecorded furniture, rather than having it deducted from their capital balance. An unrecorded asset has a book value of zero, so it was never transferred to the debit side of the Realisation Account. When the partner purchases it for ₹ 4,300 in cash, liquid money flows into the business. Following double-entry rules, the Cash (or Bank) Account is debited by ₹ 4,300 to record the incoming money, and the Realisation Account is credited by ₹ 4,300 to record the liquidation gain.