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Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessExpert
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A firm's creditors were owed ₹30,000 and were settled in full for ₹28,000. What is the gain on settlement of the creditors?

Answer and explanation

Correct answer: ₹2,000

Gain on settlement = amount payable to creditors − amount actually paid = ₹30,000 − ₹28,000 = ₹2,000. This saving is credited as a gain to the Realisation Account. Exam tip: paying less than the recorded liability creates a gain; paying more creates a loss.

Related tags

Partnership DissolutionCreditors SettlementRealisation AccountAccounting GainClosing The BusinessDissolution Of A Partnership FirmAccountancyClass 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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