Calculate the amount to be debited in the Realisation account on the dissolution of the partnership firm if debtors of ₹25,000, realised 90% only and ₹1,200 were recovered for bad debts written off last year.

₹25,000

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.   ₹25,000
    To  Debtors A/c         ₹25,000
(Transfer debtors to realisation account)

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

Journal entry for the realisation is-
Bank A/c  Dr.    
    To Realisation A/c                 
(Amount realised from debtors)

So, the amount debited in the Realization account on the dissolution is ₹25,000.