Realisation Account

Step 1: Concept of unrecorded liabilities.
During dissolution, sometimes a liability may not have been recorded earlier. When the firm pays such liabilities, it is treated as an expense of dissolution.
Step 2: Treatment in Realisation A/c.
- Debit side of Realisation A/c = expenses, payments, and settlement of liabilities.
- Credit side = proceeds of sale of assets or any income.
Step 3: Why debit?
Since payment of unrecorded liabilities reduces the firm’s resources, it is shown on the debit side of Realisation A/c.
Step 4: Conclude.
Thus, unrecorded liabilities paid are recorded on the Debit side of Realisation A/c.
Final Answer:

Step 1: Transfer of assets to Realisation A/c.
When dissolution occurs, all assets (except cash, bank, and fictitious assets) are transferred to Realisation A/c at their book value.
Step 2: Where do assets appear?
In Realisation A/c: - Debit side = Book value of assets transferred. - Credit side = Sale proceeds (realisation) from assets.
Step 3: Explanation.
Book value of assets is debited to Realisation A/c because assets are being closed from the balance sheet and transferred.
Step 4: Conclude.
Thus, book value of assets is shown on the Debit side of Realisation A/c.
Final Answer:

Step 1: Recall purpose of Realisation Account.
The Realisation Account is prepared at the time of dissolution of a firm. It records the realisation (sale) of assets and settlement of liabilities, as well as dissolution expenses.
Step 2: Nature of legal expenses.
Legal expenses are costs incurred during dissolution, such as lawyer’s fees, court charges, or other dissolution expenses. These are expenses.
Step 3: Debit side entries.
In Realisation A/c, the debit side records: - Book value of assets transferred, and - Any dissolution expenses (including legal expenses).
Step 4: Conclude.
Hence, legal expenses are recorded on the Debit side of Realisation A/c.
Final Answer: