Asset taken over by partner will be shown in:a)Debit side of Cash A/cb)Debit side of Realisation A/cc)Credit side of Cash A/cd)Credit side of Realisation A/cCorrect answer is option 'D'. Can you explain this answer?

Question

Answer

Journal entry of asset taken by partner at the time of dissolution is:- ( name of partner)capital a/c   Dr                to realisation a/c     here realisation a/c is credited so it is shown on the credit side of realisation a/c

Answer

Realisation a/c is prepared for calculate the profit/loss made on realization of assets and settlement of labilities.so,the assets taken by partner then he paid money for assets. All assets payment made on Cr.side in realisation a/c and all labilities and creditor paid on Dr.side in realisation a/c.
Entry partner's capital Dr.side and cr.side in realisation a/c.

Answer

Explanation:

When a partner takes over an asset, it means that the asset is transferred to the partner's name. In accounting, this transfer is recorded in the Realisation Account, which is prepared at the time of the dissolution of a partnership firm. The Realisation Account is a nominal account that records all the assets and liabilities of the firm being transferred to the partners' capital accounts.

The correct answer is option 'D', which states that the asset taken over by a partner will be shown on the credit side of the Realisation Account. This means that the value of the asset will be credited to the Realisation Account.

Here's a detailed explanation of why the asset is shown on the credit side of the Realisation Account:

Realisation Account:
- The Realisation Account is prepared to record the transfer of assets and liabilities to the partners' capital accounts during the dissolution of a partnership firm.
- It is a temporary account that is opened only at the time of dissolution and is closed once all the assets and liabilities are transferred.
- The Realisation Account is a nominal account, which means it is used to record expenses, losses, incomes, and gains.

Asset taken over by a partner:
- When a partner takes over an asset, it means that the asset is transferred from the partnership firm to the partner's capital account.
- The value of the asset is credited to the partner's capital account, which increases the partner's share of the assets.
- Since the Realisation Account records all the transfers of assets and liabilities, the value of the asset taken over by the partner is credited to the Realisation Account.

Significance of crediting the asset to the Realisation Account:
- Crediting the asset to the Realisation Account ensures that the transfer is properly recorded and accounted for during the dissolution process.
- It helps in maintaining the accuracy of the financial statements and the partners' capital accounts.
- By crediting the asset to the Realisation Account, the value of the asset is deducted from the total assets of the partnership firm, reflecting the decrease in the firm's assets due to the transfer.
- Additionally, it allows for the proper distribution of assets and liabilities among the partners, as each partner's capital account is credited with their respective share of the transferred asset.

In conclusion, when a partner takes over an asset, it is shown on the credit side of the Realisation Account to record the transfer of the asset from the partnership firm to the partner's capital account. This ensures proper accounting and distribution of assets during the dissolution of the firm.

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