Expenses of Realization

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 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

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 .

But if question is silent about the realization of any intangible asset like goodwill, it is assumed to have realized nil amount.

Realization of Intangible asset is to be recorded only if it is actually realized.

Memorandum Balance Sheet

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