Treatment of Provision for Bad Debts on Dissolution of a Partnership Firm.

Why we Should record Reserve for Bad Debts on credit side of Dissolution A/c on dissolution of a partnership firm?

asked Dec 9, 2015 in Partnership-Dissolution of a Partnership Firm by pooja j (233 points) 2,127 views

1 Answer

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Realisation Account is a Nominal Account.  This account is used to find out the profit or loss made at the time of dissolution of the firm.  The debit side of Realisation A/c can be called a Maha (Combined) Asset Account and credit side of Realisation A/c can be called a Maha (Combined) Liability side.  As you know that all the assets have debit balance, hence they are transferred to the debit side of the Realisation A/c and all Liabilities/Provisions have credit balance and are transferred to the credit side of the Realisation A/c.  The Reserve for Bad Debts Account is a credit balance, hence it is transferred to the credit side of the Realisation A/c.
answered Dec 9, 2015 by jbsclasses (3,971 points)
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