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Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessExpert
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If an asset with a book value of ₹75,000 is taken over by a partner for ₹69,000 and the firm bears realisation expenses of ₹1,000, what will be the total effect on the Realisation Account?

Answer and explanation

Correct answer: ₹7,000 loss

The asset causes a loss of ₹6,000 because its book value of ₹75,000 exceeds its takeover value of ₹69,000. The ₹1,000 realisation expense borne by the firm is also debited to the Realisation Account. Therefore, the total loss is ₹6,000 + ₹1,000 = ₹7,000, which is transferred to the partners’ capital accounts. Exam tip: Include both the difference between book value and takeover value and the realisation expenses while calculating the final realisation loss.

Related tags

Realisation AccountAsset TakeoverRealisation ExpensesPartnership DissolutionLoss CalculationClosing 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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