Creditors were ₹75000. They accepted stock of ₹20000 and cash of ₹50000 in full settlement. What is the result in Realisation Account?

Correct answer: ₹5000 gain

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.