Read the following information carefully and answer the next five questions.
G, K and B were partners running a partnership for last 10 years, sharing profit and loss in the ratio of 5:3:2. Post Covid, their firm was affected badly and started incurring losses. On 31st March,2023 they all decided to dissolve the firm due to continuous losses. Their capital balances were ₹4,00,000, ₹3,00,000 and ₹2,00,000 respectively. Firm had liabilities ₹80,000, cash balance ₹40,000, other sundry assets ₹8,50,000 and P&L A/c constituted the rest. Assets realised at 80% and liabilities were paid in full. There was unrecorded liability of ₹50,000 which was settled at ₹40,000. Realisation expenses amounted to ₹30,000 being paid by G on behalf of the firm.
Determine Gain/Loss on Realisation.
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Loss ₹2,40,000.
Realisation Account
| PARTICULARS | AMOUNT (₹) | PARTICULARS | AMOUNT (₹) |
| To Sundry assets | 8,50,000 | By liabilities | 80,000 |
| To Cash A/c (payment of liability) |
80,000 | By Cash A/c (Realisation of assets) |
6,80,000 |
| To Cash A/c (Unrecorded liability paid) |
40,000 | By Loss (Balancing figure) |
2,40,000 |
| To G's Capital A/c | 30,000 | ||
| 10,00,000 | 10,00,000 |
* Assets are realised at 80%
Sundry assets = 8,50,000
Realised amount = 8,50,000 x 80/100
= 6,80,000
* Liabilities are paid in full means 80,000 are paid fully.
* Unrecorded laibility is to be settled now, The journal entry for this-
Realisation A/c Dr. 40,000
To Cash A/c 40,000
* The realisation expenses has to be paid by the firm to the partner. The journal entry for this-
Realsiation A/c Dr. 30,000
To G's Capital A/c 30,000