Question

On dissolution of a firm, its Balance Sheet revealed Capital Rs. 5,00,000, General Reserve 

Rs. 2,00,000, Creditors Rs. 1,00,000 and Cash Balance Rs. 20,000. Assets were realised at 60%. What will be the gain or loss on realisation?

​

Answer 1

Answer:

Loss

Explanation:

loss = (800000-20000) * (100*60)%

       = 780000 * 40/100

       = 312000

Answer 2

There will be a loss on realization of ₹3,12,000.

Explanation:

given: Capital - ₹5,00,000

           General reserve - ₹2,00,000

           Creditors - ₹2,00,000

           Cash balance - ₹1,00,000

           Assets realized at - 60%

Find: Gain or loss on realization.

Solution:

• Since the items given in the question are from the balance sheet, the assets and liabilities sides will be equal.
• So to find the assets except for cash balance, we need to deduct cash balance from total liabilities.
• Total liabilities given = creditors + general reserve + capital = ₹1,00,000 + ₹2,00,000 + ₹5,00,000 = ₹8,00,000

• Assets except cash balance = Total liabilities - cash balance

                                                        = 8,00,000 - 20,000 = ₹7,80,000

• These assets of ₹7,80,000 were realized at 60%, meaning 40% less than the total value. It will result in loss.
• Therefore loss on realization = 7,80,000 * 40/100 = ₹3,12,000