Match each partnership dissolution transaction on the left to its corresponding double-entry accounting treatment on the right.
- Dissolution expenses paid by a partner from personal fundsDebit Realization Account and Credit Partner's Capital Account
- Transfer of realization loss to partnersDebit Partners' Capital Accounts and Credit Realization Account
- Final settlement of a partner's loan account by cash paymentDebit Partner's Loan Account and Credit Cash/Bank Account
- Cash proceeds received from the sale of an unrecorded assetDebit Cash/Bank Account and Credit Realization Account
Answer
The correct pairings are: Dissolution expenses paid by a partner matches Debit Realization Account and Credit Partner's Capital Account; Transfer of realization loss matches Debit Partners' Capital Accounts and Credit Realization Account; Final settlement of a partner's loan matches Debit Partner's Loan Account and Credit Cash/Bank Account; Cash proceeds from unrecorded asset matches Debit Cash/Bank Account and Credit Realization Account.
Each transaction during dissolution follows specific double-entry rules: expenses paid personally by a partner increase capital liability (Credit Capital, Debit Realization); realization loss reduces partner equity (Debit Capital, Credit Realization); loan discharge reduces cash and loan liability (Debit Loan, Credit Cash); and unrecorded asset proceeds increase cash and realization credits (Debit Cash, Credit Realization).
Step-by-Step Solution
Key Concept
Double-entry accounting treatment during partnership dissolution