Skip to content

CA Foundation · Accounting · Partnership and LLP Accounts

When a partner takes over an asset of the firm at an agreed value on dissolution, how is it recorded in the Realisation Account?

The Realisation Account is credited with the agreed value and the taking partner's capital account is debited. The asset is treated as realised at that value, and the partner has received it in settlement, which reduces the amount due to him.

  1. ACredited to Realisation Account and debited to that partner's capital accountCorrect
  2. BDebited to Realisation Account and credited to that partner's capital account
  3. CDebited to Realisation Account and credited to the Bank Account
  4. DCredited to Realisation Account and credited to that partner's capital account

Explanation

The asset's transfer is treated like a realisation of that amount, so Realisation Account is credited with the agreed value. The partner has effectively received value, so his capital account is debited. Crediting the capital account would wrongly increase what he is owed.

Did you get it right without looking?

One question tells you little. A timed set on Partnership and LLP Accounts shows your real accuracy, how long you take and where you lose marks.

Practise Partnership and LLP AccountsFree diagnostic mock

More Partnership and LLP Accounts questions