Question

How settlement of loan is done in dissolution of the firm?

Answer 1

The object of preparing Realisation account is to close the books of accounts of the dissolved firm and to determine profit or loss on the Realisation of assets and payment of liabilities. It is prepared by:

Transferring all the assets except Cash or Bank Account to the debit side of the account.

Transferring all the liabilities except Partner’s Loan Account and Partners’ Capital Accounts to the credit side of the account.

Crediting the Receipt on the sale of assets to the account.

Debiting the payment of Liabilities to the account.

Debiting the dissolution expenses of the firm.