Realisation Account

If credit side is higher it means profit from settlement of assets and liabilities. It is distributed among partners in profit sharing ratio.

Excess debit means realisation loss. It is debited to partners capital accounts in profit sharing ratio.

The governing concept is distribution of realisation profit in the partners’ old profit-sharing ratio. The ratio 3:2 has total parts 3 + 2 = 5. Partner A is entitled to 3 of those 5 parts, so A’s share is (3/5) × ₹50,000 = ₹30,000. This amount is credited to A’s capital account because a profit increases the partner’s capital. Partner B receives the remaining (2/5) × ₹50,000 = ₹20,000, and the two amounts total ₹50,000, confirming the calculation. Therefore option A is correct. Option B is B’s share, option C incorrectly divides the profit equally, and option D credits the entire profit to A while ignoring the agreed ratio.

A loss on realisation is debited to the partners’ Capital Accounts in their profit-sharing ratio. S’s share is \(\frac{3}{5+3}\times ₹64,000=\frac{3}{8}\times ₹64,000=₹24,000\). Hence, ₹24,000 will be debited to S’s Capital Account. Choosing ₹32,000 incorrectly treats the loss as being shared equally. Exam tip: Add the ratio terms first, then multiply the loss by the concerned partner’s ratio share.

When asset realisation is below book value a loss arises. It is reflected through the final balance of Realisation Account.

Book value of asset is the sacrifice base and proceeds are compared with it. This determines realisation profit or loss.

Book value of liability is credited and its payment is debited. If paid for less it shows gain.

Debit balance of Profit and Loss Account is accumulated loss and goes directly to capital accounts. Assets and external liabilities go to Realisation Account.

The direct answer is option A, Bills Payable. On dissolution, the Realisation Account is used to record the transfer and settlement of assets and external liabilities. Assets are transferred to the debit side because they are taken out of the books for realisation. External liabilities are transferred to the credit side because the firm must settle them, and their transfer represents a claim being recorded there. Bills Payable is an external liability, so it goes to the credit side. Option A is correct. Option B, Furniture, is an asset and is transferred to the debit side, not the credit side. Option C, Stock, is also an asset and therefore goes to the debit side. Option D, Salary paid in advance, is normally a current asset or prepaid expense, so it is treated as an asset and transferred to the debit side, subject to the usual accounting treatment. The key distinction is liability versus asset. Memory cue: in the Realisation Account, assets generally enter on the debit side and external liabilities on the credit side.

Book value of worthless asset remains debited in Realisation Account and proceeds are nil. This increases realisation loss.

Only actual cash received is credited in Realisation Account. Discount is not separately posted and is included in final result.

Proceeds are ₹100000 and expenses are ₹3000 so net receipt is ₹97000. Compared with book value ₹120000 the loss is ₹23000.

Asset takeover amount is credited separately at ₹45000. Acceptance of liability is treated separately as settlement of liability.

When a liability is settled Realisation Account is debited. Since the partner assumes it his capital is credited.

Sale proceeds received in cash or bank debit Bank Account and credit Realisation Account. In exams record proceeds at actual amount.

Gain on assets is ₹14000 but extra payment on liabilities is ₹4000 loss. Net realisation profit is ₹10000.

Receipt from unrecorded asset is credited and payment of unrecorded liability is debited. Net credit gives ₹5000 profit.

Prepaid insurance is an asset so it is debited to Realisation Account. If nothing is realised the whole amount forms part of loss.

The direct answer is option A: show both the asset-realisation credit and the liability-payment debit. In dissolution accounting, two economic events occur even when the cash does not pass through the firm. First, the asset is realised or sold, so the Realisation Account receives a credit for the sale proceeds. Second, the creditor’s liability is settled, so the Realisation Account receives a debit for the amount paid or adjusted. Option A correctly records both parts. Option B, no entry, is wrong because both the asset and liability must be removed or settled. Option C records only the liability settlement and ignores the asset realisation. Option D records only the sale and ignores payment of the creditor. Direct payment changes the cash route, not the accounting substance. The exam cue is: record the asset event and the liability event separately, even when one is directly adjusted against the other.

Both sale proceeds and stock taken over by partner are credited to Realisation Account. Total credit is ₹30000 plus ₹12500 equal to ₹42500.

Actual payment is debited to Realisation Account. Discount is not recorded separately and appears in the final result.

Realisation Account is a temporary nominal account and is closed at dissolution. After transferring profit or loss to capital accounts its balance is nil.