Question

How is partner's loan account treated in realisation account ?

Entry for paying partners loan

Partners loan A/C Dr.

To Cash/Bank A/C

so does this come into realisation account or not ?

Answer 1

no..this transaction will not effect realisation account

Answer 2

Partner's loan a/c …Dr To Cash/Bank A/c

This transaction will not appear in the realization account.

Explanation:

The object of getting a ready Realization account is to close the books of records of the closed or the dissolved firm and to decide losses or profits on the Realization of assets and installment of liabilities. It is set up by:  

• Moving every one of the assets with the exception of cash or bank account to the debit side of the record.  
• Moving every one of the liabilities aside from partner's loan account and partners' capital accounts to the credit side of the record.  
• Crediting the Receipt on the clearance i.e. sale of the assets for the record.  
• Charging the payment or installment of liabilities to the record.  
• Charging disintegration or dissolution expenses of the firm.

The balance in the record might be either benefit or loss. We take this balance to the partner's capital account and distribute the losses or the profits in their profit sharing proportion.

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