Realisation Account

Payment of external liability is shown on the debit side of Realisation Account. The liability is first transferred to Realisation Account.

Debtors are assets so book value is debited and amount realised is credited. In exams the loss is not separately posted.

Asset taken over by a partner is credited to Realisation Account at agreed value. Book value is already debited first.

Taking over of an asset is treated like realisation in Realisation Account. Since agreed value exceeds book value there is a gain.

Advertising suspense is a fictitious asset and normally not transferred to Realisation Account. It is written off to partners capital accounts.

Realisation expenses paid by the firm are debited to Realisation Account. They reduce realisation profit.

The partner paid firm expenses so Realisation Account is debited and partner capital is credited. This creates a claim in favour of the partner.

When partner is allowed fixed commission only the commission is recorded. Actual expenses are borne by the partner.

Only remuneration payable to the partner is treated as expense in Realisation Account. Actual expenses are borne by the partner.

Liability settled for less than book value creates realisation gain. Liability is credited and payment is debited.

The direct answer is option A, a ₹5000 gain. Creditors are owed ₹75000, but they accept assets worth ₹20000 and cash of ₹50000. The total amount used to settle the liability is therefore ₹20000+₹50000=₹70000. The firm is released from a liability of ₹75000 by giving up resources worth only ₹70000. The saving is ₹75000-₹70000=₹5000, which is a gain in the Realisation Account. Option A is correct. Option B, ₹5000 loss, reverses the direction: paying less than the liability creates a gain, not a loss. Option C, ₹70000 gain, incorrectly treats the total settlement as the gain; ₹70000 is the amount paid, not the saving. Option D, no profit or loss, is wrong because the liability and settlement amounts differ. In a Realisation Account, liabilities settled for less than their book amount produce a gain equal to the difference. Memory cue: liability amount minus actual settlement amount gives gain when the result is positive.

Unrecorded asset has no book value but sale proceeds are credited to Realisation Account. It increases realisation profit.

The governing concept is the treatment of unrecorded assets and liabilities during dissolution. An unrecorded liability is not present in the books, so there is no existing liability account to close. When the firm pays it, Bank or Cash is credited for the outflow, while Realisation Account is debited because the payment is a realisation expense or loss connected with winding up. Thus the relevant treatment asked in the question is debit Realisation Account with ₹11,000, making option A correct. It reduces the profit on realisation or increases the loss. Option B would incorrectly increase realisation profit. Option C records the bank side rather than the requested account and with the wrong debit direction. Option D is not the normal entry for settling the firm’s unrecorded obligation.

Reserves and profit balances are distributed directly through partners capital accounts. Realisation Account is only for assets and external liabilities.

Cash and Bank are already liquid funds so they are not transferred to Realisation Account. They are used to record receipts and payments.

Employees provident fund is an external liability. External liabilities are transferred to the credit side of Realisation Account.

Loan from partner's wife is an external liability of the firm. Hence it is taken to Realisation Account like other liabilities.

Partner's loan remains in a separate account and is paid through Bank. Realisation Account is for external liabilities.

Trade creditors are external liabilities so they go to Realisation Account. Partner's loan is settled separately.

Gross debtors are debited and provision is credited to Realisation Account. Amount realised is also credited.

Realisation Account has debit ₹72000 and credits ₹6000 plus ₹68000. Excess credit gives ₹2000 profit.

A recorded policy is an asset so book value is debited and amount received is credited. This gives ₹12000 gain.

Amount received from an unrecorded asset is credited to Realisation Account. There is no book value to debit.

When the buyer assumes the loan cash receipt is sale value minus loan. Hence Bank receives ₹35000.

Expenses borne by the buyer are not expenses in the firm's books. The firm records only the actual receipt.