(Question 6 — do any three of four sub-parts) Hardip, Avtar and Karan Sharing profits equally, they dissolved the firm. Following is their Balance Sheet as at 30th June, 2018:
Liabilities — Sundry Creditors 33,000; Reserve for Contingency 15,000; Profit and Loss A/c 9,000; Hardip

Question

(Question 6 — do any three of four sub-parts) Hardip, Avtar and Karan Sharing profits equally, they dissolved the firm. Following is their Balance Sheet as at 30th June, 2018:
Liabilities — Sundry Creditors 33,000; Reserve for Contingency 15,000; Profit and Loss A/c 9,000; Hardip's wife loan 12,000; 12% Bank Loan 20,000; Capital Accounts: Hardip 80,000, Avtar 30,000, Karan 20,000; Current Accounts: Hardip 15,000, Avtar 10,000; Total 2,44,000.
Assets — Bank 9,000; Debtors 60,000; Stock 80,000; Furniture 25,000; Plant 50,000; Current Account: Karan 20,000; Total 2,44,000.
(a) The Assets realised as follows: Debtors ₹ 25,000, Stock ₹ 70,000, Plant ₹ 30,200.
(b) Bank Loan was repaid alongwith interest of six months.
(c) It was found that an investment not recorded in the books is worth ₹ 8,000. This is taken over by one of the creditors at this value.
(d) Hardip agreed to accept furniture in full settlement of his wife's Loan.
(e) There is a bill for ₹ 10,000 under discount. This bill was received from Vikas. Vikas proved insolvent and 60% were received from his estate.
Prepare Realisation Account.

Accepted Answer

>

> [!TLDR]
> Loss on realisation = 75,000; each partner bears 25,000.
>
> Realisation Account (Hardip, Avtar, Karan — equal partners):
>
> Debit side (assets transferred at book value + payments):
> - To Debtors 60,000
> - To Stock 80,000
> - To Furniture 25,000
> - To Plant 50,000
> - To Bank — Creditors paid (33,000 - 8,000 investment taken over) 25,000
> - To Bank — 12% Bank Loan + 6 months interest (20,000 + 1,200) 21,200
> - To Bank — Bill under discount honoured on Vikas's insolvency 10,000
> - To Hardip's Capital A/c — wife's loan settled 12,000
> Total Debit = 2,83,200
>
> Credit side (liabilities transferred + amounts realised):
> - By Sundry Creditors 33,000
> - By Hardip's Wife's Loan 12,000
> - By 12% Bank Loan 20,000
> - By Bank — Debtors 25,000 + Stock 70,000 + Plant 30,200 = 1,25,200
> - By Hardip's Capital A/c — Furniture taken over in settlement of wife's loan 12,000
> - By Bank — received from Vikas's estate (60% of 10,000) 6,000
> Total Credit = 2,08,200
>
> Loss on Realisation = 2,83,200 - 2,08,200 = 75,000. …

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

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