Question

On dissolution of the firm, loss calculated in realisation account is debited/credited to which account?

Options

• Cash Account (Credit)

• Partner’s Capital Account (Debit)

• Partner’s Capital Account (Credit)

• Realisation Account (Debit)

Answer 1

Partner’s Capital Account (Debit)

Explanation:

On the dissolution of a firm, the loss calculated in the realisation account is debited to the partner’s capital accounts. This is because the loss from the realisation of assets and settlement of liabilities is shared by the partners according to their profit-sharing ratio, which reduces the balance in their capital accounts. If there is a loss, the partners will bear it in the agreed ratio, leading to a debit entry in their respective capital accounts.