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Question : A, B and C started business on 1st April 2019 with capitals of Rs. 1,00,000; Rs. 80,000 and Rs. 60,000 respectively sharing profits (losses) in the ratio of 4:3:3. For the year ended 31st March 2020, the firm incurred a loss of Rs. 50,000. Each of the partners withdrew Rs. 10,000 during the year.

On 31st March 2020, the firm was dissolved, the creditors of the firm stood at Rs. 24,000 on that date and Cash in Hand was Rs. 4,000. The assets realised Rs. 3,00,000 and Creditors were paid Rs. 23,500 in full settlement of their claims.
Question:
In case of profit and loss on realization. Realization account will be debited/credited by

Option 1: Partner's capital account debited and credited realization account by Rs 1,20,500

Option 2: Realization account debited and partner's capital account credited by Rs 1,20,500

Option 3: Profit and loss account debited and credited partner's capital account

Option 4: None of the above


Team Careers360 13th Jan, 2024
Answer (1)
Team Careers360 24th Jan, 2024

Correct Answer: Realization account debited and partner's capital account credited by Rs 1,20,500


Solution : Answer = Realization account debited and partner's capital account credited by Rs 1,20,500

Realisation a/c
To Sundry Assets 1,80,000 S.Liabilities
To Cash (creditor) 23,500 By Creditor 24,000
To Profit 1,20,500 By Cash (assets realised) 3,00,000
3,24,000 3,24,000

Realisation A/C Dr         1,20,500
To Partner's capital. A/C               1,20,500
Hence, the correct option is 2.

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