A, B and C are equal partners. The Balance Sheet on the date of dissolution was as follows:

Liabilities | Amount (Rs.) | Assets | Amount (Rs.)
Creditors | 11,000 | Bank | 3,000
Bills Payable | 1,000 | Bills Receivable | 2,000
B's Loan | 2,000 | Investment | 8,000
Capital: A 36,0

Question

A, B and C are equal partners. The Balance Sheet on the date of dissolution was as follows:

Assets realised — Debtors and Bills receivable Rs. 17,000, Investment Rs. 7,600, Stock Rs. 25,000, Furniture Rs. 6,600 and Machinery Rs. 8,600. Liabilities were paid. Realisation Expenses were Rs. 500. Prepare Realisation Account.

Accepted Answer

>

> [!TLDR]
> Loss on Realisation = Rs 8,700; A, B, C each bear Rs 2,900.
>
> **Realisation Account**
>
> | Dr. — Particulars | Amount (Rs) | Cr. — Particulars | Amount (Rs) |
> |---|---|---|---|
> | To Bills Receivable | 2,000 | By Creditors | 11,000 |
> | To Investment | 8,000 | By Bills Payable | 1,000 |
> | To Debtors | 16,000 | By Bank (assets realised): | |
> | To Stock | 28,000 |   Debtors & B/R 17,000 | |
> | To Furniture | 6,000 |   Investment 7,600 | |
> | To Machinery | 13,000 |   Stock 25,000 | |
> | To Bank (liabilities paid): | |   Furniture 6,600 | |
> |   Creditors 11,000 | |   Machinery 8,600 | 64,800 |
> |   Bills Payable 1,000 | 12,000 | By Loss on Realisation: | |
> | To Bank (realisation expenses) | 500 |   A 2,900; B 2,900; C 2,900 | 8,700 |
> | **Total** | **85,500** | **Total** | **85,500** |
>
> **Notes / working**
> - All assets except Bank are transferred to the debit at book value (Bills Receivable 2,000 + Investment 8,000 + Debtors 16,000 + Stock 28,000 + Furniture 6,000 + Machinery 13,000 = 73,000).
> - Outside liabilities (Creditors 11,000, Bills Payable 1,000) are transferred to the credit; their actual payment is debited. …

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. — Particulars	Amount (Rs)	Cr. — Particulars	Amount (Rs)
To Bills Receivable	2,000	By Creditors	11,000
To Investment	8,000	By Bills Payable	1,000
To Debtors	16,000	By Bank (assets realised):
To Stock	28,000	Debtors & B/R 17,000
To Furniture	6,000	Investment 7,600
To Machinery	13,000	Stock 25,000
To Bank (liabilities paid):		Furniture 6,600
Creditors 11,000		Machinery 8,600	64,800
Bills Payable 1,000	12,000	By Loss on Realisation:
To Bank (realisation expenses)	500	A 2,900; B 2,900; C 2,900	8,700
Total	85,500	Total	85,500

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