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At the time of dissolution of a partnership firm, a liability of ₹6,000 is settled for ₹5,000. What will be its effect on the Realisation Account?

Answer and explanation

Correct answer: ₹1,000 का लाभ

The liability was recorded at ₹6,000, but it was settled for only ₹5,000. Therefore, the firm gains ₹1,000, which is credited as a profit to the Realisation Account. A ₹1,000 loss would arise if the settlement amount exceeded the liability. Exam tip: Settlement of a liability for less than its book value results in a profit on realisation.

Related tags

Partnership DissolutionRealisation AccountSettlement Of LiabilitiesAccounting ProfitDissolution Of A Partnership FirmAccountancyClass 12 Mcq

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