(Question 3(iii) — internal choice, attempt this OR the alternative) Sony and Harsh were partners sharing profits equally. Their Balance Sheet as on March 31st, 2025 was as follows:
Liabilities — Capitals: Sony 1,00,000, Harsh 50,000 = 1,50,000; Creditors 20,000; Harsh's current

Question

(Question 3(iii) — internal choice, attempt this OR the alternative) Sony and Harsh were partners sharing profits equally. Their Balance Sheet as on March 31st, 2025 was as follows:
Liabilities — Capitals: Sony 1,00,000, Harsh 50,000 = 1,50,000; Creditors 20,000; Harsh's current account 10,000; Workmen Compensation Reserve 15,000; Bank overdraft 5,000; Total 2,00,000.
Assets — Bank 30,000; Debtors 25,000; Stock 35,000; Furniture 40,000; Machinery 60,000; Sony's current account 10,000; Total 2,00,000.
The firm was dissolved on the above date:
1. Sony took over 50% of the stock at 10% less on its book value, and the remaining stock was sold at a gain of 15%. Furniture and Machinery realised for ₹ 30,000 and ₹ 50,000 respectively.
2. There was an unrecorded investment which was sold for ₹ 34,000.
3. Debtors realised 90% only and ₹ 1,200 were recovered for bad debts written-off last year.
4. There was an outstanding bill for repairs which had to be paid for ₹ 2,000.
Prepare realisation account.

Accepted Answer

>

> [!TLDR]
> Realisation Account shows a profit of Rs 11,575 (Sony and Harsh Rs 5,787.50 each).
>
> Sony:Harsh = 1:1. Assets to DEBIT (book value): Debtors 25,000, Stock 35,000, Furniture 40,000, Machinery 60,000. Outside liabilities to CREDIT: Creditors 20,000, Bank overdraft 5,000. (Workmen Compensation Reserve 15,000 has no claim, so it is distributed to the partners' capitals, not through Realisation; the partners' current accounts and Bank are also not transferred here.)
>
> Realisations/payments:
> - Stock: 50% (17,500) taken by Sony at 10% less = 15,750 (to Sony's Capital); remaining 50% (17,500) sold at 15% gain = 20,125 (Bank).
> - Furniture realised 30,000; Machinery realised 50,000 (Bank).
> - Unrecorded investment sold for 34,000 (Bank).
> - Debtors realised 90% = 22,500 (Bank); bad debts recovered (written off earlier) 1,200 (Bank).
> - Creditors paid 20,000; Bank overdraft paid 5,000; outstanding repairs bill 2,000 paid (all from Bank).
>
> Realisation Account
> DEBIT: To Debtors 25,000; To Stock 35,000; To Furniture 40,000; To Machinery 60,000; To Bank (Creditors) 20,000; To Bank (Bank overdraft) 5,000; To Bank (Outstanding repairs) 2,000. Total = 1,87,000. …

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
…

Q.(Question 3(iii) — internal choice, attempt this

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

Q.(Question 3(iii) — internal choice, attempt this

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