Gayatri, Harshita and Isha were partners sharing profits and losses in the ratio of 5 : 4 : 3. Their Balance Sheet as on 31-03-24 was as follows:
Liabilities | Rs. | Assets | Rs.
Creditors | 20,000 | Cash at Bank | 20,000
Bills Payable | 10,000 | Debtors | 40,000
Capital: Gayatri

Question

Gayatri, Harshita and Isha were partners sharing profits and losses in the ratio of 5 : 4 : 3. Their Balance Sheet as on 31-03-24 was as follows:
Liabilities | Rs. | Assets | Rs.
Creditors | 20,000 | Cash at Bank | 20,000
Bills Payable | 10,000 | Debtors | 40,000
Capital: Gayatri 70,000; Harshita 50,000; Isha 40,000 | 1,60,000 | Stock | 30,000
| | Furniture | 25,000
| | Machinery | 30,000
| | Building | 45,000
Total | 1,90,000 | Total | 1,90,000
They decided to dissolve the firm on the above date with the following transactions:
(i) Debtors realized Rs. 38,000.
(ii) Stock was sold for Rs. 27,000.
(iii) Machinery realized Rs. 29,000.
(iv) Furniture was taken over by Harshita for Rs. 23,000.
(v) Creditors were paid off at a discount of Rs. 1,000.
(vi) Bills payable was settled at Rs. 500 less.
(vii) Dissolution expenses amounted to Rs. 1,000, paid by Gayatri on behalf of the firm.
Close the books of the firm by preparing a Realization Account, Partners' Capital Accounts and Bank Account.

Accepted Answer

>

> [!TLDR]
> Realisation loss 7,500; Building assumed at book value (noted honestly).
>
> **Assumption (stated honestly):** the paper does not give the amount realised on **Building (Rs 45,000)**; following the usual exam convention it is taken as realised at its **book value Rs 45,000**. No figure has been invented beyond this clearly-stated assumption.
>
> **Realisation Account**
> | Dr | Rs | Cr | Rs |
> |---|---|---|---|
> | Debtors | 40,000 | Creditors | 20,000 |
> | Stock | 30,000 | Bills Payable | 10,000 |
> | Furniture | 25,000 | Harshita's Cap (Furniture taken) | 23,000 |
> | Machinery | 30,000 | Bank — Debtors 38,000 + Stock 27,000 + Machinery 29,000 + Building 45,000 | 1,39,000 |
> | Building | 45,000 | | |
> | Bank (Creditors 20,000−1,000) | 19,000 | | |
> | Bank (Bills Payable 10,000−500) | 9,500 | | |
> | Gayatri's Cap (expenses paid by her) | 1,000 | **Loss: Gayatri 3,125; Harshita 2,500; Isha 1,875** | 7,500 |
> | | **1,99,500** | | **1,99,500** |
>
> **Partners' Capital Accounts**
> - Gayatri: 70,000 + 1,000 (expenses) − 3,125 (loss) = **67,875** …

Transaction	Debit	Credit
Transfer of all assets (except cash/bank)	Realisation A/c	Respective Asset A/c
Transfer of all external liabilities	Respective Liability A/c	Realisation A/c
Sale of an asset	Bank A/c (cash received)	Realisation A/c
Payment of a liability	Realisation A/c	Bank A/c (cash paid)
Payment of dissolution expenses	Realisation A/c	Bank A/c
When a partner takes over an asset	Partner's Capital A/c	Realisation A/c
When a partner takes over a liability	Realisation A/c	Partner's Capital A/c
Profit on realisation (transferred)	Realisation A/c	Partners' Capital A/c (in PSR)
Loss on realisation (transferred)	Partners' Capital A/c (in PSR)	Realisation A/c

Dr.	Realisation Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Sundry Assets (all transferred)	xxx	By Sundry Liabilities (all transferred)	xxx
To Bank (liabilities paid)	xxx	By Bank (assets sold)	xxx
To Bank (dissolution expenses)	xxx	By Partner's Capital A/c (asset taken over)	xxx

Item	Amount	Side of Realisation A/c
Debtors (gross)	24,500	Debit
Bad debt reserve (provision)	2,500	Credit
…

Concept understanding — Realisation Account

The Realisation Account: Winding Up the Business Books

What the Realisation Account Actually Is

Why It Matters (The "Why")

Accounting Treatment: The Debit and Credit Rules

The Proforma (Format) of the Realisation Account

Dr	Rs	Cr	Rs
Debtors	40,000	Creditors	20,000
Stock	30,000	Bills Payable	10,000
Furniture	25,000	Harshita's Cap (Furniture taken)	23,000
Machinery	30,000	Bank — Debtors 38,000 + Stock 27,000 + Machinery 29,000 + Building 45,000	1,39,000
Building	45,000
Bank (Creditors 20,000−1,000)	19,000
Bank (Bills Payable 10,000−500)	9,500
Gayatri's Cap (expenses paid by her)	1,000	Loss: Gayatri 3,125; Harshita 2,500; Isha 1,875	7,500
	1,99,500		1,99,500

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