Meena and Tina are partners in a firm and share profit as 3:2. They decided to dissolve their firm on March 31, 2017, when their Balance Sheet was as follows:
Balance Sheet Meena and Tina as of March 31,2017
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Capital: | Machinery | 70,000 | |
| Meena 90,000 | Investments | 50,000 | |
| Tina 80,000 | 1,70,000 | Stock | 22,000 |
| Sundry creditors | 60,000 | Sundry Debtors | 1,03,000 |
| Bills payable | 20,000 | Cash at bank | 5,000 |
| 2,50,000 | 2,50,000 |
The assets and liabilities were disposed off as follows:
a) Machinery were given to creditors in full settlement of their account and stock were given bills payable in full settlement.
b) Investment were took over by Tina at book value. Sundry debtors of book value ₹50,000 took over by Meena at 10% less and remaining debtors realised ₹51,000.
c) Realisation expenses amount to ₹2,000.
State Journal entry for payment of realisation expenses.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Realisation A/c Dr. ₹2,000 To Bank A/c ₹2,000
Expenses of realisation are a cost of winding up the firm, so they are a loss on realisation. They are charged to the debit of the Realisation Account, and the cash paid goes out of the bank.
Realisation A/c Dr. ₹2,000
To Bank A/c ₹2,000
No separate Realisation Expenses Account is opened; the expense is debited straight to the Realisation Account, as in the book’s solution below.
NCERT (2026-27 edition):
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