8. A and B are in equal partnership. Their Balance stood as follows liabilities Assets Capital accounts: A Creditors 600 3,900 Plant & Machinery Furniture Debtors stock Bank B’s capital 1,475 400 500 625 300 1,200 4,500 4,500 The assets were realized as follows Stock Rs.350; furniture Rs.200; debtors Rs.500; And plant and Machinery Rs. 700. The cost of collecting and distributing the estate amounted to Rs. 150 A’s private estate is not sufficient even to pay his private liabilities, where as in B’s private estate, there is a surplus of Rs.50. Prepare Realization account
Answers
Concept
Realisation account is an account that is opened during the dissolution of partnership firm. The objective of preparation of realisation account is to calculate profit or loss on dissolution of partnership firm. The transactions related to realisation of assets and settlement of liabilities are recorded in this account.
Given
creditors=1475, plant and machinery=400, furniture=500, debtors=625, stock=300, bank=1200, B's capital=4500, A's capital=4500.
To do
Prepare realisation account.
Explanation
To prepare a realisation account we need to take all asset in the debit side of realisation account and all the liabilities except capital in the credit side of realisation account.
After this, when assets realises bank will be debited and realisation account will be credited. If liabilities are paid then bank will be credited and realisation account will be debited.
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