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Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessHard
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At the dissolution of a partnership firm, assets with a book value of ₹24,000 were sold for ₹26,000, and realisation expenses amounted to ₹1,000. What is the net result of the Realisation Account?

Answer and explanation

Correct answer: Profit of ₹1,000

The gain on the sale of assets is ₹26,000 − ₹24,000 = ₹2,000. Realisation expenses of ₹1,000 reduce this gain, so the net profit of the Realisation Account is ₹2,000 − ₹1,000 = ₹1,000. ₹2,000 is only the gain before expenses, so option C is incorrect. In an exam, calculate the asset-sale gain or loss first and then adjust realisation expenses.

Related tags

Partnership DissolutionRealisation AccountClosing BusinessProfit And LossNumerical AccountingClosing The BusinessDissolution Of A Partnership FirmAccountancy
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10 more MCQs
  1. 1What is the process of permanently closing a partnership firm and ending its existence called?
  2. 2Which account is prepared at the time of dissolution of a firm to determine the profit or loss arising from the settlement of its assets and external liabilities?
  3. 3What is generally done with the assets of a partnership firm at the time of its dissolution?
  4. 4On dissolution of a partnership firm, from what are the external liabilities generally paid?
  5. 5To which account is the realisation profit transferred?
  6. 6To which account is the realisation loss transferred?
  7. 7What happens to the existence of the firm after dissolution?
  8. 8Dissolution expenses are generally debited to which account?
  9. 9At the time of dissolution, if an asset is sold for ₹10,000, what amount will be credited to the Realisation Account?
  10. 10On dissolution of a firm, to whom is the final cash balance paid after settling outside liabilities and other amounts due?
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