Question

On 31st March, 2025, the partnership between Hari and Om was dissolved. Hari was appointed to look after dissolution work for which he was allowed a commission of Rs 9,700. He agreed to bear the dissolution expenses. The actual expenses of dissolution amounted to Rs 8,900 which were paid by Hari's friend, Bhanu on his behalf. The amount debited to Realisation Account will be:

• A. Rs 9,700
• B. Rs 8,900
• C. Rs 10,000
• D. Nil

Hint:

Hari bears the expenses, so only his commission of Rs. 9,700 is debited to the Realisation Account.

Answer 1

The Correct Option is A

Step 1: Read the facts:
Hari gets a commission of Rs. 9,700 for looking after the dissolution work.
He agreed to bear the dissolution expenses. The actual expenses were Rs. 8,900 and were paid by his friend Bhanu on his behalf.

Step 2: Apply the rule:
When a partner takes a commission and bears the expenses, the firm pays only the commission.
The expenses are the cost of Hari, no matter who paid them. The firm makes no entry for them.

Step 3: Pass the entry:
Realisation A/c Dr. Rs. 9,700 and To Hari Capital A/c Rs. 9,700 (commission for dissolution work).

Step 4: Why the other options are wrong:
(B) Rs. 8,900 is the expense. Hari bears it, so it is not charged to the firm. Bhanu paying it for Hari does not change this.
(C) Rs. 10,000 matches no figure in the question.
(D) Nil would be correct only if there were no commission. The commission of Rs. 9,700 is a firm cost.

Final Answer:
Realisation Account is debited with Rs. 9,700, option (A).