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.

Loss ₹2,40,000

The correct answer is option 1- Loss ₹2,40,000.

Realisation Account

* 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