When realisation expenses are paid by the firm on behalf of a partner, it means the partner was supposed to bear these expenses personally, but the firm has made the payment.
In such a case, the firm has essentially made a payment for the partner. This creates a liability on the partner's part towards the firm.
Journal Entry:
Partner's Capital A/c Dr.
To Bank A/c
Since the firm has paid on behalf of the partner, the partner owes this amount to the firm. This reduces the partner's claim (capital) in the firm.
Important distinction: If realisation expenses were simply paid by the firm (as normally happens), then Realisation Account would be debited. However, when expenses are paid on behalf of a partner, it means the partner was responsible for paying it, and the firm is just facilitating the payment. Hence, the partner's account is affected, not the Realisation Account.
Answer: Option 2 - Partner's Capital Account