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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
Ashish and Kanav were partners in a firm sharing profits and losses in the ratio of 3 : 2. On 31st March, 2018, their Balance Sheet showed Trade Creditors ₹42,000, Employees’ Provident Fund ₹10,000, Mrs. Ashish’s Loan ₹9,000, Kanav’s Loan ₹85,000, Workmen’s Compensation Fund ₹20,000, Investment Fluctuation Reserve ₹4,000, Capitals – Ashish ₹1,20,000, Kanav ₹80,000; Bank ₹35,000, Stock ₹24,000, Debtors ₹19,000, Furniture ₹40,000, Plant ₹2,10,000, Investments ₹32,000, Profit and Loss A/c (Dr.) ₹10,000. On the above date they decided to dissolve the firm. (a) Ashish agreed to take over furniture at ₹38,000 and pay off Mrs. Ashish’s loan. (b) Debtors realised ₹18,500, and Plant realised 10% more. (c) Kanav took over 40% of the stock at 20% less than book value; the remaining stock was sold at a gain of 10%. (d) Trade Creditors took over Investments in full settlement. (e) Kanav agreed to take over the responsibility of completing the dissolution at an agreed remuneration of ₹12,000 and to bear the realisation expenses; actual expenses of realisation amounted to ₹8,000. Prepare the Realisation Account. (CBSE 2019)
REALISATION ACCOUNT
| Particulars | ₹ | Particulars | ₹ |
|---|---|---|---|
| To Stock A/c | 24,000 | By Trade Creditors A/c | 42,000 |
| To Debtors A/c | 19,000 | By Employees’ Provident Fund A/c | 10,000 |
| To Furniture A/c | 40,000 | By Mrs. Ashish’s Loan A/c | 9,000 |
| To Plant A/c | 2,10,000 | By Investment Fluctuation Reserve A/c | 4,000 |
| To Investments A/c | 32,000 | By Ashish’s Capital A/c (Furniture taken over) | 38,000 |
| To Ashish’s Capital A/c (Mrs. Ashish’s Loan taken over) | 9,000 | By Kanav’s Capital A/c (Stock taken over) | 7,680 |
| To Kanav’s Capital A/c (Remuneration) | 12,000 | By Bank A/c: | |
| To Bank A/c (EPF paid) | 10,000 | Debtors 18,500 | |
| Plant 2,31,000 | |||
| Stock 15,840 | 2,65,340 | ||
| By Profit transferred to: | |||
| Ashish’s Capital A/c 12,012 | |||
| Kanav’s Capital A/c 8,008 | 20,020 | ||
| Total | 3,76,020 | Total | 3,76,020 |
Working Notes: Kanav took 40% of stock (₹9,600 book value) at 20% less = ₹7,680; remaining stock (₹14,400) sold at a 10% gain = ₹15,840. Plant realised 10% more = 2,10,000 × 110% = ₹2,31,000. Trade Creditors took over Investments (book value ₹32,000) in full settlement of their ₹42,000 claim — the resulting gain flows through the overall profit figure. Kanav bore the actual realisation expenses of ₹8,000 personally in exchange for his fixed ₹12,000 remuneration, so no further entry is needed for them. Profit of ₹20,020 shared 3 : 2: Ashish ₹12,012; Kanav ₹8,008.
Note on the Balance Sheet: As originally scraped, the source’s figure for Kanav’s Loan (₹35,000) does not let the Balance Sheet balance to the stated ₹3,70,000 total; the correct figure, consistent with the stated total, is ₹85,000 (used above). Being a partner’s loan, it is settled separately and does not enter the Realisation Account.
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Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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