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Which item among the following is NOT listed on the credit side of a Realization Account?

Solution

✅ Correct Option: 2

The Realization Account is prepared during the dissolution of a partnership firm to record the disposal of assets and settlement of liabilities.

Credit Side of Realization Account includes:

  • All external liabilities (creditors, outstanding expenses, loans taken, etc.)
  • Sale proceeds of assets realized
  • Any unrecorded liabilities

Debit Side of Realization Account includes:

  • All assets (except cash/bank)
  • Realization expenses

Analyzing each option:

Bank Loan Mortgage → This is a liability (money owed by the firm). Liabilities are credited to Realization Account.

Loan to other parties → This means the firm has lent money to others, making it an asset (money receivable). Assets appear on the debit side, not the credit side of Realization Account.

Outstanding expenses → This is a liability (unpaid expenses owed by the firm). Liabilities are credited to Realization Account.

Provision for doubtful debts → Though it appears on the liabilities side of the Balance Sheet, it is credited to Realization Account as it reduces the book value of debtors transferred.

Therefore, Loan to other parties is NOT listed on the credit side because it is an asset that appears on the debit side of Realization Account.

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