Deferred Tax Liability A deferred tax liability represents an obligation to pay taxes in the future. These taxes are owed by a company but are not due to be paid until a future date. Companies that incur such an obligation prepare and maintain two financial reports every year: a tax statement and anRead more
Deferred Tax Liability
A deferred tax liability represents an obligation to pay taxes in the future. These taxes are owed by a company but are not due to be paid until a future date.
Companies that incur such an obligation prepare and maintain two financial reports every year: a tax statement and an income statement.
This is because companies maintain their books as per book accounting rules (GAAP/IFRS), but they have to pay taxes according to tax accounting rules, and they each have to follow their own guidelines.
For example, a tax statement follows the cash basis of accounting, and an income statement follows the accrual basis of accounting.
Companies calculate their profit as per the accounting rules as well as tax laws known as accounting income and taxable income, respectively. Some differences arise due to the application of different provisions of law.
These temporary differences are accounted for, recognized, and carried forward in the books of accounts and create deferred tax.
Example
Here is an example of deferred tax liability.
In the given example, tax as per income statement is 70,000, whereas as per tax statement it is 56,000. This temporary difference is termed as deferred tax liability of 14,000.
When accounting income is more than taxable income, it creates Deferred Tax Liability. It will be adjusted in the books of accounts during one or more subsequent year(s).
How Does it Arise?
There are several instances under which a company creates a deferred tax liability. Some other instances are:
Depreciation Methods
One of the most common reasons for deferred tax liability is when a company uses different depreciation methods in the Income and Tax Statement.
Assets are depreciated by calculating the straight-line method in the Income Statement, while the written-down value method is used in the Tax Statement.
Since the straight-line value method produces lower depreciation when compared to the WDV method, accounting income is temporarily higher than taxable income.
The company recognises deferred tax liability as this difference between accounting income and taxable income.
Treatment of Revenue & Expenses
Deferred tax liability can also arise when there is a difference in the way revenue and expenses are treated in books of accounts.
As mentioned earlier, accounting rules follow the accrual basis of accounting while tax laws follow the cash basis of accounting.
Meaning in the tax statement, income and expenses are recorded when they are received or paid, not when they are incurred or realised.
This difference in the treatment of revenue and expenses creates deferred tax liability.
Impact on Financial Statements
Recognising deferred tax liability and its subsequent effect on the company’s financial statement is important as it simplifies the process of auditing and analysing financial reports.
Balance Sheet
Deferred tax liabilities are recorded on the liability side of the balance sheet under non-current liabilities.
Cash Flow Statement
The deferred tax liability is added back to the net income in calculating cash flow from operating activities to show the actual cash flow.
To understand why we do not record self-generated goodwill in accounting, let us first understand what goodwill is and its accounting treatment. What is Goodwill? Goodwill is an intangible asset of a business. It represents the reputation and brand value of a business built over time. It is a valueRead more
To understand why we do not record self-generated goodwill in accounting, let us first understand what goodwill is and its accounting treatment.
What is Goodwill?
Goodwill is an intangible asset of a business. It represents the reputation and brand value of a business built over time. It is a value over and above the tangible assets of the business.
Goodwill often arises when a business purchases another business and pays a premium, which means a price higher than the fair value of the business.
Characteristics of Goodwill
Goodwill has the following characteristics:
It is an Intangible asset, meaning it has no physical existence and cannot be seen or touched.
It is generally recognized during transactions in mergers and acquisitions.
It is the value attributed to the brand value and reputation of the business.
It adds value to a business beyond its tangible assets.
Example of Goodwill
Let us take an example to better understand the concept of goodwill.
Suppose there is a company ABC Ltd. It is planning to acquire XYZ Ltd. The fair value of the assets of XYZ is calculated to be 600,000. However, ABC has agreed to pay an amount of 650,000 to acquire the company. This difference of 50,000 is goodwill.
What is self-generated goodwill?
Self-generated goodwill in simple words means the positive reputation or trust that a business earns over time through their own hard work and decisions. It’s not something bought or inherited but something built from scratch internally, like a brand’s reputation, loyal customers, strong relationships, or unique ideas.
For example, a small business that goes the extra mile to offer great customer service or always delivers high-quality products over the years will naturally build goodwill.
It is also known as internally generated goodwill.
Why do we not record sef-generated goodwill?
Self-generated goodwill is not recorded in the financial statements because of the following reasons:
Measurement may not be reliable: The measurement of self-generated goodwill is majorly based on the judgment of the managers. It is based on the value creation because of a good reputation or consumer base of the business, which might not be measured accurately.
Conservatism principle: As per the conservatism principle, a business shall not overstate its assets or liabilities. However, self-generated goodwill might be overstated.
Lack of market transaction: There is a lack of a market transaction that ensures verification of the value of goodwill as in the case of purchased goodwill.
Manipulation: There are higher chances of manipulation of financial statements through self-generated goodwill.
Conclusion
On a concluding note, self-generated goodwill is something that adds real value to a business, but it’s not something that can easily be measured or captured in financial statements. Accounting is all about providing clear, reliable information, and including goodwill would make things murky and open to manipulation. Even though it doesn’t show up on the books, you can still see its effects in a company’s reputation and success. Maybe in the future, businesses will find a way to highlight it better, but for now, leaving it out helps keep financial reports honest and straightforward.
Brands can be considered as an Intangible asset as they are a long-term investment done by the company and it gives benefit to an entity in future periods. Like any other intangible asset, brands require long-term investment and will pay over time. Like any other asset, these brands can be bought anRead more
Brands can be considered as an Intangible asset as they are a long-term investment done by the company and it gives benefit to an entity in future periods.
Like any other intangible asset, brands require long-term investment and will pay over time. Like any other asset, these brands can be bought and sold. Brands are best used when they serve the vision and mission of the company.
So, we can definitely consider an organization brand as an intangible as it is expected to increase sales volume in the future period.
Further, we can understand both terms to get a deep understanding-
BRAND
Brand means a product, or service which has a unique identification and can be distinct from other products in the market. Branding is a process by which expenditure is incurred by an entity to create awareness towards the product in the customer’s eyes.
For example- Maggie, Coca-Cola, BMW
Brands can be created through these elements-
Design
Packaging
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INTANGIBLE ASSETS
Intangible asset are assets that can’t be seen or touched but the benefit of it occur in future periods for the entity. Even though intangible assets have no physical form but their benefits will accrue in future years. Businesses commonly hold intangible assets. Intangible assets can be further bifurcated in
Definite– Intangible assets that stay and give benefit for a limited or specific period of time covered under this
For example- An agreement is entered with an entity to patent a product for 5 years so this will stay for a definite period only
Indefinite– Intangible assets that stay and  give benefit for an unlimited  period of time covered under this
For example- A brand which is made by an entity will stay for an indefinite period
Intangible assets can be in various forms these are the following –
Trademark– A trademark is a sign, design, and expression that distinguish the company’s product or services from other company. Trademark is considered an Intellectual Property Right.
Goodwill– Goodwill refers to the value of the company that the company gets from its brand, customer base, and brand Reputation associated with its intellectual property.
Patents– A patent refers to a right reserved for a product exclusively by a person or entity. Under this the right of such making of the product gets reserved by the company and other person or entity can’t make this product.
Copyright– Copyright refers to an intellectual property right that protects the work of the original owner from being copied by some other person.
Brand– Brand means a product, or service that has a unique identification and can be distinct from other products in market
So, we can definitely consider that brand is a subpart of an intangible asset and can be considered as an intangible asset as it also can’t be touched or seen. Still, its benefit will accrue till future time. These both help an entity to grow its business till the future
Accrual Accrual expense means the transaction that takes place in a particular period must be accounted for in that period only irrespective of the fact when such amount has been paid. An accrual of the expenditure which is not paid will be listed in the books of accounts. These accruals can be furtRead more
Accrual
Accrual expense means the transaction that takes place in a particular period must be accounted for in that period only irrespective of the fact when such amount has been paid.
An accrual of the expenditure which is not paid will be listed in the books of accounts. These accruals can be further divided into two parts
Accrual Expense-
Accrual Expense means any transaction that takes place in a particular period but the amount for it will be paid on a later period.
For example- If rent of 10,000 for the month of March was paid in April month then this rent will be accounted for in the books in March
For example- Interest of 1,000 for the month of March of the loan amount of 10,000 paid in April then will be accounted for in the books in March
These are the following accrued expense
Accrual Rent– Accrual rent means the amount for using the land of the landlord is paid at a later period than the period when it is put into use.
Accrual Insurance– Accrual insurance means the amount paid as a premium to the insurance company paid on a later period than the period when it is due
Accrual Expense- Acrrual expense means the amount for any expense paid on a later period than the period when it pertains to be paid
Accrual Wages- Accrual wages means the amount which is paid to employees on a later period than the period when the wages get due
Accrual Loan Interest– Loan Interest means the amount of interest on a loan which is paid on a later period than the period when it is due on
Accrual Revenue-
Accrual Revenue means any transaction that takes place in a particular period but the amount for it will be received in the later period.
For example- If interest of 10,000 on bonds for the period of March is received in April months then this amount will be accounted for in March. These are the following accrued revenue
For example- Rent of 10,000 for the month of March received in April month then this rent will be accounted for in the books in March
Accrual Income- Acrrual expense means the amount for any income received on a later period than the period when it pertains to be received
Accrual Rent– Accrual rent means the amount for using the land of the entity by the other party is received at a later period than the period when it is put into use.
Accrued Interest– Accrued interest means the amount of interest received on a later period than the period when it pertains to receive
Realisation account A realisation account is a nominal account prepared at the time of dissolution of a business. All the assets and liabilities except cash and bank balance are transferred to the realisation account. A realisation account is prepared to calculate the profit or loss on the dissoluRead more
Realisation accountÂ
A realisation account is a nominal account prepared at the time of dissolution of a business. All the assets and liabilities except cash and bank balance are transferred to the realisation account. A realisation account is prepared to calculate the profit or loss on the dissolution or closing of the firm.
All the assets are transferred to the debit of the realisation account and all the liabilities are transferred to the credit of the realisation account. When assets are sold, Cash A/c is debited and Reliastion A/c is credited and when liabilities are paid off, Cash A/c is credited and Realisation A/c is credited.
If the credit side exceeds the debit side of the realisation account, it results in profit. In contrast, if the debit side exceeds the credit side of the realisation account, it results in a loss. in case of profit, the Capital account is credited and in case of loss, the Capital account is debited.
The debit side of the realisation account
All the assets including Land and building, Plant and machinery, furniture, stock, debtor and investment are transferred to the debit of the realisation account and payment of outside liabilities is also recorded on the debit side of the realisation account. Payment made for dissolution expenses is also recorded on the debit side of the realisation account.
Assets: All the assets including Land and building, Plant and machinery, Furniture, Stock, sundry debtors, and investments are transferred to the debit side of the realisation account. The debit balance of profit and loss balance is not transferred.
Accounting entry for this is as follows:
Realisation A/c Dr…..
To Assets A/c …..
(All the assets transferred to the realisation account)
Cash and bank A/c: Payment for the liabilities including sundry creditors, outstanding expenses, bills payable, loans and advances, bank overdrafts and cash credit is transferred to the debit side of the realisation account.
Accounting entry for this is as follows:
Realisation A/c Dr…..
To Cash A/c …..
(Payment made for liabilities)
Profit on realisation: If the credit side of the realisation account exceeds the debit side, it results in a profit then the capital account is credited.
Accounting entry for this is as follows:
Realisation A/c Dr…..
To Capital A/c …..
(Being profit transferred to the capital account)
Credit side of realisation account:
All the liabilities and provisions are transferred to the credit side of the realisation account. Capital account of partners, profit and loss balance and loans from partners are not transferred. Sale proceeds of all the assets including Land and building, Plant and machinery, furniture, stock, debtor and investment are transferred to the credit side of the Realisation account.
Realisation account A realisation account is a nominal account prepared at the time of dissolution of a business. All the assets and liabilities except cash and bank balance are transferred to the realisation account. A realisation account is prepared to calculate the profit or loss on the dissoluRead more
Realisation accountÂ
A realisation account is a nominal account prepared at the time of dissolution of a business. All the assets and liabilities except cash and bank balance are transferred to the realisation account. A realisation account is prepared to calculate the profit or loss on the dissolution or closing of the firm.
All the assets are transferred to the debit of the realisation account and all the liabilities are transferred to the credit of the realisation account. When assets are sold, Cash A/c is debited and Reliastion A/c is credited and when liabilities are paid off, Cash A/c is credited and Realisation A/c is credited.
If the credit side exceeds the debit side of the realisation account, it results in profit. In contrast, if the debit side exceeds the credit side of the realisation account, it results in a loss. in case of profit, the Capital account is credited and in case of loss, the Capital account is debited.
Credit side of realisation account
Liabilities: All the liabilities including sundry creditors, outstanding expenses, bills payable, loans and advances, bank overdrafts and cash credit are transferred to the credit side of the realisation account. Capital account of partners, profit and loss balance and loans from partners are not transferred.
Accounting entry for this is as follows:
Liabilities A/c Dr…..
To Realisation A/c …..
(All the liabilities transferred to realisation account)
Provisions: All the provisions including provision for doubtful debts and provision for taxation are transferred to the credit side of the realisation account.
Accounting entry for this is as follows:
Provision A/c Dr…..
To Realisation A/c …..
(All the provisions transferred to the realisation account)
Cash and bank A/c: Sale proceeds of all the assets including Land and building, Plant and machinery, furniture, stock, debtor and investment are transferred to the credit side of the Realisation account.
Accounting entry for this is as follows:
Bank A/c Dr…..
To Realisation A/c …..
(Asset sold for cash)
Loss on realisation: If the debit side of the realisation account exceeds the credit side, it results in loss then the capital account is debited.
Accounting entry for this is as follows:
Capital A/c Dr…..
To Realisation A/c …..
(Being loss transferred to the capital account)
The debit side of the realisation account
All the assets including Land and building, Plant and machinery, furniture, stock, debtor and investment are transferred to the debit of the realisation account and payment of outside liabilities is also recorded on the debit side of the realisation account. Payment made for dissolution expenses is also recorded on the debit side of the realisation account.
What is a deferred tax liability?
Deferred Tax Liability A deferred tax liability represents an obligation to pay taxes in the future. These taxes are owed by a company but are not due to be paid until a future date. Companies that incur such an obligation prepare and maintain two financial reports every year: a tax statement and anRead more
Deferred Tax Liability
A deferred tax liability represents an obligation to pay taxes in the future. These taxes are owed by a company but are not due to be paid until a future date.
Companies that incur such an obligation prepare and maintain two financial reports every year: a tax statement and an income statement.
This is because companies maintain their books as per book accounting rules (GAAP/IFRS), but they have to pay taxes according to tax accounting rules, and they each have to follow their own guidelines.
For example, a tax statement follows the cash basis of accounting, and an income statement follows the accrual basis of accounting.
Companies calculate their profit as per the accounting rules as well as tax laws known as accounting income and taxable income, respectively. Some differences arise due to the application of different provisions of law.
These temporary differences are accounted for, recognized, and carried forward in the books of accounts and create deferred tax.
Example
Here is an example of deferred tax liability.
In the given example, tax as per income statement is 70,000, whereas as per tax statement it is 56,000. This temporary difference is termed as deferred tax liability of 14,000.
When accounting income is more than taxable income, it creates Deferred Tax Liability. It will be adjusted in the books of accounts during one or more subsequent year(s).
How Does it Arise?
There are several instances under which a company creates a deferred tax liability. Some other instances are:
Depreciation Methods
Treatment of Revenue & Expenses
Impact on Financial Statements
Recognising deferred tax liability and its subsequent effect on the company’s financial statement is important as it simplifies the process of auditing and analysing financial reports.
Balance Sheet
Cash Flow Statement
- The deferred tax liability is added back to the net income in calculating cash flow from operating activities to show the actual cash flow.
See lessWhy don’t we record self-generated goodwill in accounting?
To understand why we do not record self-generated goodwill in accounting, let us first understand what goodwill is and its accounting treatment. What is Goodwill? Goodwill is an intangible asset of a business. It represents the reputation and brand value of a business built over time. It is a valueRead more
To understand why we do not record self-generated goodwill in accounting, let us first understand what goodwill is and its accounting treatment.
What is Goodwill?
Goodwill is an intangible asset of a business. It represents the reputation and brand value of a business built over time. It is a value over and above the tangible assets of the business.
Goodwill often arises when a business purchases another business and pays a premium, which means a price higher than the fair value of the business.
Characteristics of Goodwill
Goodwill has the following characteristics:
Example of Goodwill
Let us take an example to better understand the concept of goodwill.
Suppose there is a company ABC Ltd. It is planning to acquire XYZ Ltd. The fair value of the assets of XYZ is calculated to be 600,000. However, ABC has agreed to pay an amount of 650,000 to acquire the company. This difference of 50,000 is goodwill.
What is self-generated goodwill?
Self-generated goodwill in simple words means the positive reputation or trust that a business earns over time through their own hard work and decisions. It’s not something bought or inherited but something built from scratch internally, like a brand’s reputation, loyal customers, strong relationships, or unique ideas.
For example, a small business that goes the extra mile to offer great customer service or always delivers high-quality products over the years will naturally build goodwill.
It is also known as internally generated goodwill.
Why do we not record sef-generated goodwill?
Self-generated goodwill is not recorded in the financial statements because of the following reasons:
Conclusion
On a concluding note, self-generated goodwill is something that adds real value to a business, but it’s not something that can easily be measured or captured in financial statements. Accounting is all about providing clear, reliable information, and including goodwill would make things murky and open to manipulation. Even though it doesn’t show up on the books, you can still see its effects in a company’s reputation and success. Maybe in the future, businesses will find a way to highlight it better, but for now, leaving it out helps keep financial reports honest and straightforward.
See lessAre brands intangible assets?
Brands can be considered as an Intangible asset as they are a long-term investment done by the company and it gives benefit to an entity in future periods. Like any other intangible asset, brands require long-term investment and will pay over time. Like any other asset, these brands can be bought anRead more
Brands can be considered as an Intangible asset as they are a long-term investment done by the company and it gives benefit to an entity in future periods.
Like any other intangible asset, brands require long-term investment and will pay over time. Like any other asset, these brands can be bought and sold. Brands are best used when they serve the vision and mission of the company.
So, we can definitely consider an organization brand as an intangible as it is expected to increase sales volume in the future period.
Further, we can understand both terms to get a deep understanding-
BRAND
Brand means a product, or service which has a unique identification and can be distinct from other products in the market. Branding is a process by which expenditure is incurred by an entity to create awareness towards the product in the customer’s eyes.
For example- Maggie, Coca-Cola, BMW
Brands can be created through these elements-
INTANGIBLE ASSETS
Intangible asset are assets that can’t be seen or touched but the benefit of it occur in future periods for the entity. Even though intangible assets have no physical form but their benefits will accrue in future years. Businesses commonly hold intangible assets. Intangible assets can be further bifurcated in
Definite– Intangible assets that stay and give benefit for a limited or specific period of time covered under this
For example- An agreement is entered with an entity to patent a product for 5 years so this will stay for a definite period only
Indefinite– Intangible assets that stay and  give benefit for an unlimited  period of time covered under this
For example- A brand which is made by an entity will stay for an indefinite period
Intangible assets can be in various forms these are the following –
Trademark– A trademark is a sign, design, and expression that distinguish the company’s product or services from other company. Trademark is considered an Intellectual Property Right.
Goodwill– Goodwill refers to the value of the company that the company gets from its brand, customer base, and brand Reputation associated with its intellectual property.
Patents– A patent refers to a right reserved for a product exclusively by a person or entity. Under this the right of such making of the product gets reserved by the company and other person or entity can’t make this product.
Copyright– Copyright refers to an intellectual property right that protects the work of the original owner from being copied by some other person.
Brand– Brand means a product, or service that has a unique identification and can be distinct from other products in market
So, we can definitely consider that brand is a subpart of an intangible asset and can be considered as an intangible asset as it also can’t be touched or seen. Still, its benefit will accrue till future time. These both help an entity to grow its business till the future
See lessWhat are some examples of deferred revenue expenses?
Fixed
Fixed
See lessWhat is the best example of accrual accounting?
Accrual Accrual expense means the transaction that takes place in a particular period must be accounted for in that period only irrespective of the fact when such amount has been paid. An accrual of the expenditure which is not paid will be listed in the books of accounts. These accruals can be furtRead more
Accrual
Accrual expense means the transaction that takes place in a particular period must be accounted for in that period only irrespective of the fact when such amount has been paid.
An accrual of the expenditure which is not paid will be listed in the books of accounts. These accruals can be further divided into two parts
Accrual Expense-
Accrual Expense means any transaction that takes place in a particular period but the amount for it will be paid on a later period.
For example- If rent of 10,000 for the month of March was paid in April month then this rent will be accounted for in the books in March
For example- Interest of 1,000 for the month of March of the loan amount of 10,000 paid in April then will be accounted for in the books in March
These are the following accrued expense
Accrual Revenue-
Accrual Revenue means any transaction that takes place in a particular period but the amount for it will be received in the later period.
For example- If interest of 10,000 on bonds for the period of March is received in April months then this amount will be accounted for in March. These are the following accrued revenue
For example- Rent of 10,000 for the month of March received in April month then this rent will be accounted for in the books in March
- Accrual Income- Acrrual expense means the amount for any income received on a later period than the period when it pertains to be received
- Accrual Rent– Accrual rent means the amount for using the land of the entity by the other party is received at a later period than the period when it is put into use.
- Accrued Interest– Accrued interest means the amount of interest received on a later period than the period when it pertains to receive
See lessWhat comes in debit side of Realisation account?
Realisation account A realisation account is a nominal account prepared at the time of dissolution of a business. All the assets and liabilities except cash and bank balance are transferred to the realisation account. A realisation account is prepared to calculate the profit or loss on the dissoluRead more
Realisation accountÂ
A realisation account is a nominal account prepared at the time of dissolution of a business. All the assets and liabilities except cash and bank balance are transferred to the realisation account. A realisation account is prepared to calculate the profit or loss on the dissolution or closing of the firm.
All the assets are transferred to the debit of the realisation account and all the liabilities are transferred to the credit of the realisation account. When assets are sold, Cash A/c is debited and Reliastion A/c is credited and when liabilities are paid off, Cash A/c is credited and Realisation A/c is credited.
If the credit side exceeds the debit side of the realisation account, it results in profit. In contrast, if the debit side exceeds the credit side of the realisation account, it results in a loss. in case of profit, the Capital account is credited and in case of loss, the Capital account is debited.
The debit side of the realisation account
All the assets including Land and building, Plant and machinery, furniture, stock, debtor and investment are transferred to the debit of the realisation account and payment of outside liabilities is also recorded on the debit side of the realisation account. Payment made for dissolution expenses is also recorded on the debit side of the realisation account.
Realisation A/c Dr…..
To Assets A/c …..
(All the assets transferred to the realisation account)
Realisation A/c Dr…..
To Cash A/c …..
(Payment made for liabilities)
Realisation A/c Dr…..
To Capital A/c …..
(Being profit transferred to the capital account)
Credit side of realisation account:
All the liabilities and provisions are transferred to the credit side of the realisation account. Capital account of partners, profit and loss balance and loans from partners are not transferred. Sale proceeds of all the assets including Land and building, Plant and machinery, furniture, stock, debtor and investment are transferred to the credit side of the Realisation account.
Format for realisation Account is as under:
What is recorded on the credit side of a Realisation account?
Realisation account A realisation account is a nominal account prepared at the time of dissolution of a business. All the assets and liabilities except cash and bank balance are transferred to the realisation account. A realisation account is prepared to calculate the profit or loss on the dissoluRead more
Realisation accountÂ
A realisation account is a nominal account prepared at the time of dissolution of a business. All the assets and liabilities except cash and bank balance are transferred to the realisation account. A realisation account is prepared to calculate the profit or loss on the dissolution or closing of the firm.
All the assets are transferred to the debit of the realisation account and all the liabilities are transferred to the credit of the realisation account. When assets are sold, Cash A/c is debited and Reliastion A/c is credited and when liabilities are paid off, Cash A/c is credited and Realisation A/c is credited.
If the credit side exceeds the debit side of the realisation account, it results in profit. In contrast, if the debit side exceeds the credit side of the realisation account, it results in a loss. in case of profit, the Capital account is credited and in case of loss, the Capital account is debited.
Credit side of realisation account
Liabilities A/c Dr…..
To Realisation A/c …..
(All the liabilities transferred to realisation account)
Provision A/c Dr…..
To Realisation A/c …..
(All the provisions transferred to the realisation account)
Bank A/c Dr…..
To Realisation A/c …..
(Asset sold for cash)
Capital A/c Dr…..
To Realisation A/c …..
(Being loss transferred to the capital account)
The debit side of the realisation account
All the assets including Land and building, Plant and machinery, furniture, stock, debtor and investment are transferred to the debit of the realisation account and payment of outside liabilities is also recorded on the debit side of the realisation account. Payment made for dissolution expenses is also recorded on the debit side of the realisation account.
Format for realisation Account is as under:
See less