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The book value of debtors was ₹70,000, but ₹65,000 was realised from them. What is the result of this realisation?

Answer and explanation

Correct answer: Loss of ₹5,000

The book value of debtors was ₹70,000, whereas the amount realised was only ₹65,000. Therefore, the shortfall is ₹70,000 − ₹65,000 = ₹5,000, which is recorded as a loss in the Realisation Account. ₹4,000 and ₹6,000 result from an incorrect subtraction. Exam tip: when an asset is realised for less than its book value, the difference is treated as a loss.

Related tags

Partnership DissolutionRealisation AccountDebtorsLoss On RealisationClosing BusinessClosing The BusinessDissolution Of A Partnership FirmAccountancy

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