When assets are realized during a partnership dissolution, the entries for the proceeds are to debit?
Answer Details
When assets are realized during a partnership dissolution, the entries for the proceeds are to debit cash account and credit realization account.
Realization account is an account used to record all gains or losses on the disposal of assets during a partnership dissolution. The proceeds from the sale of assets are credited to realization account, while any expenses incurred in the process are debited to the same account. Finally, the balance on realization account is transferred to the partners' capital accounts in profit sharing ratio.
In this case, since the assets are being sold and the proceeds are being received in cash, the cash account is debited to reflect the increase in cash. The realization account is credited to reflect the gain or loss made on the sale of assets.