Question

The journal entry for a liability which a partner takes responsibility to discharge is:

• A. Realisation A/c Dr.
  To Bank A/c
• B. Bank A/c Dr.
  To Realisation A/c
• C. Realisation A/c Dr.
  To Partner's Capital A/c
• D. Partner's Capital A/c Dr.
  To Realisation A/c

Answer 1

The correct option is C Realisation A/c Dr.

To Partner's Capital A/c
The Realisation account is prepared to record the transactions relating to sale and realisation of assets and settlement of creditors. Any profit or loss arising out of this process is shared by the partners' in their profit sharing ratio. Partners' accounts are also settled and the cash or bank account is closed. Realisation A/c is debited while Partner's Capital A/c is credited for a liability which a partner takes responsibility to discharge.