Question

On firm’s dissolution, on realisation of goodwill (which was shown in balance sheet) will be credited to ______.

Options

• Cash A/c

• Realisation A/c

• Profit & Loss A/c

• None of the A/c

Answer 1

On firm’s dissolution, on realisation of goodwill (which was shown in balance sheet) will be credited to realisation a/c.

Explanation:

On the dissolution of a firm, if goodwill is shown in the balance sheet, its realisation (writing off) is recorded in the realisation account. This is because the realisation account is used to account for all assets and liabilities during dissolution, and any profit or loss on the realisation of assets, including goodwill, is eventually distributed among the partners in their profit-sharing ratio.