Question

Ekam and Akash were partners in a firm sharing profits in the ratio of 3 : 2. On 31st March, 2024 the Balance Sheet of the firm was as follows: 

The firm was dissolved on above date and the assets and liabilities were settled as follows: 
(a) Land and Building was taken over by the creditors as their full and final payment. 
(b) Ekam accepted an unrecorded asset of ₹50,000 in full settlement of his loan. 
(c) Furniture was taken over by Akash for cash payment at 5% less than the book value. 
(d) Debtors were collected by a debt collection agency at a cost of ₹10,000. 
(e) Bills Receivable realised ₹1,41,000. 
(f) Akash agreed to bear all realization expenses. For this service Akash is to be allowed ₹1,000. Actual expenses on realization ₹2,000 was paid by Akash. 
Prepare Realisation Account. 
 

Hint:

In a Realisation Account, all assets are credited at the amount realised, and liabilities are debited at the amount settled. The gain or loss is then distributed among partners.

Answer 1

Step 1: Prepare the Realisation Account. 
The Realisation Account records the assets and liabilities that are realised during the dissolution of the firm. The gain or loss from the sale of assets is transferred to the partners' capital accounts. Realisation Account 

Step 2: Calculate the Realisation Profit/Loss. 
The total amount realised is: \[ \text{Total Realised} = 4,80,000 + 3,32,500 + 1,40,000 + 1,41,000 + 12,34,000 = 23,27,500 \] The total liabilities to be settled are: \[ \text{Total Liabilities} = 1,94,000 + 40,000 = 2,34,000 \] The Realisation profit is the difference between total realised amount and total liabilities: \[ \text{Realisation Profit} = 23,27,500 - 2,34,000 = 20,93,500 \] Step 3: Allocate the Realisation Profit to Partners. 
Since Ekam and Akash share profits in the ratio of 3:2, the Realisation profit is shared as follows: \[ \text{Ekam’s share} = \frac{3}{5} \times 20,93,500 = 12,56,100 \] \[ \text{Akash’s share} = \frac{2}{5} \times 20,93,500 = 8,37,400 \] Step 4: Conclusion. 
The final Realisation Account will reflect the settlement of assets and liabilities, and the Realisation profit will be transferred to Ekam and Akash's capital accounts based on their sharing ratio.