Realization Expenses on Dissolution of Firm
Expenses of realization can be treated in the following ways, depending on the information available and the instruction given in the question.
(a) When realization expenses are borne and paid by the firm:
Realization A/c Dr.
Bank A/c
(b) When the firm has agreed to pay remuneration to a partner for the realization proceedings irrespective of the actual realization expenses:
Realization A/c Dr.
Partners’ Capital A/c
(c) When the actual expenses are paid by the firm on behalf of a partner:
Partners’ Capital A/c Dr.
Bank A/c
(d) When the partner agrees to pay the expenses on behalf of the firm:
Realization A/c Dr.
Partners’ Capital A/c
NOTE: You must check in question paper the words 'borne by' and 'paid by' and treat accordingly.
Treatment of Goodwill
Goodwill is treated like any other asset, there is no special treatment on Dissolution of firm.
Sometimes, question is silent about the repayment of some liabilities. In that case, it is assumed that these have been repaid at their book values .
As per C.B.S.E. syllabus, The realizable value of asset must be given.
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