Question

The firm paid realisation expenses of ₹ 10,000 on behalf of Nihar, a partner with whom it was agreed at ₹ 25,000. Realisation Expenses came to ₹ 35,000. Realisation Account will be debited by ______.

Options

• ₹ 10,000

• ₹ 35,000

• ₹ 25,000

• ₹ 70,000

Answer 1

The firm paid realisation expenses of ₹ 10,000 on behalf of Nihar, a partner with whom it was agreed at ₹ 25,000. Realisation Expenses came to ₹ 35,000. Realisation Account will be debited by ₹ 25,000.

Explanation:

The fixed remuneration of ₹ 25,000 is the only actual dissolution cost the firm agreed to bear, so this is the only amount debited to the Realisation Account. Once a fixed deal is made, any actual realisation expenses (₹ 35,000) become the partner’s personal responsibility and do not change the firm’s realisation expense ledger. The ₹ 10,000 paid by the firm on Nihar’s behalf is treated as a personal advance and is debited directly to Nihar’s Capital Account.