Calculate the amount to be debited in the Realisation account on the dissolution of the partnership firm if debtors of ₹25000, realised 90% only and ₹1200 were recovered for bad debts written off last year.

₹25000

The correct answer is option 3- ₹25,000

On dissolution, all asset accounts excluding cash, bank and the fictitious assets, if any are closed by transfer to the debit of Realisation Account at their book values. Thus, in this case we have to transfer full amount of debtors to the debit side.

Following journal entry is passed-
Realisation A/c  Dr.   ₹25000
    To  Debtors A/c         ₹25000
(Transfer debtors to realisation account)

Thus, in realisation account, the amount to be debited is Rs 25,000 in respect of debtors.

Note: After transferring debtors to realisation account, the journal entry for the realisation of debtors is passed.
Amount realized from debtors = 25000 x 90/100
                                                = 22500
Amount recovered from bad debts written off last year = 1200
Total amount to be realised = 22500 + 1200
                                           = ₹23700

Journal entry for the realisation is-
Bank A/c  Dr.      ₹23700
    To Realisation A/c                  ₹23700
(Amount realised from debtors and bad debts recovered)

So, the amount credited in the Realization account on the dissolution is ₹23,700.