Sita, Rita and Meeta are partners sharing profits and losses equally. On 31st March, 2022, they decided to dissolve the business. On that date, the Capital Account Balance were Sita-₹1,00,000; Rita-₹80,000 and Meeta-₹60,000. Creditors for ₹30,000 and Reserve Fund for ₹30,000 were also lying in the books of the firm while on Assets side, Sundry Assets were existing at ₹2,70,000. Sundry assets included patents for ₹20,000. The tangible assets were realised at 90% of the book value while creditors were settled at 110%. Realisation expenses were ₹10,000 paid by Sita. There was an unrecorded assets of ₹5,000 which was taken over by Meeta.
Answer question on the basis of above information.
Identify the nature of Realisation A/c.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Nominal A/c
The Realisation Account is opened only to work out the profit or loss on realisation of assets and payment of liabilities. Its balance is a gain or a loss that is closed to the partners’ capital accounts, so it is a nominal account.
Option (1) Real A/c — Incorrect. A real account records an asset; the Realisation Account records no asset of its own.
Option (3) Personal A/c — Incorrect. It is not the account of any person.
Option (4) Representative Personal A/c — Incorrect. Such accounts (outstanding or prepaid items) stand for persons; the Realisation Account does not.
Note: This topic is not covered in any edition of the NCERT Accountancy textbook.