Question

On disSolution of a partnership firm, if realisation expenses are paid by the firm on behalf of a partner, then such expenses are debited to which of the following account:

• A. Realisation Account
• B. Partner’s Capital Account
• C. Partner’s Loan Account
• D. Bank Account

Hint:

Realisation expenses paid on behalf of a partner are treated as a reduction in the partner’s capital account balance, not as an expense of the firm.

Answer 1

The Correct Option is B

When a firm settles realization expenses on behalf of a partner who is obligated to bear them, these expenses are charged to the Partner's Capital Account. This action reflects the firm's settlement of the partner's liability, thereby decreasing the partner's capital.Conclusion:The firm's payment of a partner's realization expenses results in a debit to the Partner’s Capital Account.