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Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessHard
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On dissolution of the firm, assets with a book value of ₹1,00,000 were sold for ₹97,000, and realisation expenses of ₹2,000 were incurred. What will be the overall result in the Realisation Account?

Answer and explanation

Correct answer: Loss of ₹5,000

The loss on the sale of assets is ₹1,00,000 − ₹97,000 = ₹3,000. Adding the realisation expenses of ₹2,000 gives a total loss of ₹5,000. Therefore, the Realisation Account shows a loss of ₹5,000. The ₹3,000 option considers only the loss on sale and ignores the expenses. Exam tip: Include both the difference between book value and sale proceeds and all realisation expenses while calculating the overall result.

Related tags

AccountancyDissolution Of PartnershipRealisation AccountClosing The BusinessNumericalDissolution Of A Partnership FirmClass 12 Mcq
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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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