Based on following Balance Sheet of Tarnav and Manav as at 31st March 2022, answer question:
Balance Sheet as at 31st March 2022
|
Liabilities |
₹ |
Assets |
₹ |
|
Sundry Creditors |
30,000 |
Cash at Bank |
13,000 |
|
80,000 |
|
80,000 |
On that date the firm was dissolved on the following terms:
(i) Tarnav promised to pay Sanjay's loan and took over stock in trade at ₹4,000.
(ii) Creditors, payable after one month, were paid immediately at a discount of 6% per annum.
(iii) Debtors of ₹1,000 proved bad, plant realised 130%.
(iv) Expenses on Realisation were ₹1,500 borne and paid by Manav.
(v) Manav took over an old computer completely written off from the book at ₹500.
Calculate amount realised from Debtors.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → ₹19,000
Debtors are transferred to the Realisation Account at their book value. The amount realised is the book value less the debts that proved bad; the provision for doubtful debts is a separate item transferred to the credit of the Realisation Account and does not change the cash collected.
Debtors = ₹20,000
Less: Bad debts = ₹1,000
Amount realised from debtors = ₹19,000