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
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.
