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 the amount of Profit & Loss Account.
Answer & explanation
Correct answer: option 2
The correct answer is option 2- ₹90,000 Dr.
The profit and loss balance can be calculated by preparing the balance sheet of the firm.
| LIABILITIES | AMOUNT (₹) | ASSETS | AMOUNT (₹) |
| Liability | 80,000 | Cash | 40,000 |
| Capital Balance: G 4,00,000 K 3,00,000 B 2,00,000 |
9,00,000 | Sundry assets | 8,50,000 |
| Profit and loss Balance ( Balancing figure) | 90,000 | ||
| 9,80,000 | 9,80,000 |
As the balancing figure is on assets side which represent the debit balance of profit and loss account. So, the correct answer is option 2.