All assets (except cash/bank and fictitious assets) are transferred to the__________ side of __________Account.
All assets (except cash/bank and fictitious assets) are transferred to the__________ side of __________Account.
Solution
When a partnership firm is dissolved, all assets (except cash/bank and fictitious assets) are transferred to the Debit side of Realisation Account.
Journal Entry:
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Realisation A/c Dr. | xxx | |
| To Assets A/c (Individual) | xxx | |
| (Being assets transferred to Realisation Account) |
Why Debit side?
Assets represent resources owned by the firm. When transferred to Realisation Account, they appear on the debit side because the firm will realize/sell these assets to generate cash for settlement.
Why Cash/Bank excluded?
Cash and Bank are not transferred as they are required to record actual payments and receipts during the dissolution process.
Why Fictitious Assets excluded?
Fictitious assets (like Preliminary Expenses, Advertisement Suspense, Deferred Revenue Expenditure) have no realizable value. They are directly written off by debiting Partners' Capital Accounts in their profit-sharing ratio.
The Realisation Account acts as a nominal account that summarizes the entire dissolution process - showing what assets were sold, what liabilities were paid, and ultimately the profit or loss on realization.
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