Question:
Manav and Namit were partners in a firm sharing profits and losses in the ratio of 3 : 2. Their Balance Sheet as at 31st March 2024 was as follows:
Liabilities Assets Capitals: Machinery ₹8,00,000 Manav ₹4,00,000 Investments ₹5,00,000 Namit ₹6,00,000 Debtors ₹12,00,000 Bank Overdraft ₹9,00,000 Stock ₹3,00,000 Creditors ₹10,00,000 Cash in Hand ₹1,00,000 Total ₹29,00,000 Total ₹29,00,000
The firm was dissolved on the above date and the following transactions took place:
[(i)] Stock was given to creditors in full settlement of their account.
[(ii)] Investments were taken over by Manav at 120% of book value.
[(iii)] Bad debts amounted to ₹ 2,00,000.
[(iv)] Machinery was realised at 50% discount.
[(v)] Realisation expenses amounted to ₹ 1,00,000 which were paid by Namit.
Prepare Realisation Account.
Manav and Namit were partners in a firm sharing profits and losses in the ratio of 3 : 2. Their Balance Sheet as at 31st March 2024 was as follows:
| Liabilities | Assets | ||
|---|---|---|---|
| Capitals: | Machinery | ₹8,00,000 | |
| Manav | ₹4,00,000 | Investments | ₹5,00,000 |
| Namit | ₹6,00,000 | Debtors | ₹12,00,000 |
| Bank Overdraft | ₹9,00,000 | Stock | ₹3,00,000 |
| Creditors | ₹10,00,000 | Cash in Hand | ₹1,00,000 |
| Total | ₹29,00,000 | Total | ₹29,00,000 |
The firm was dissolved on the above date and the following transactions took place:
[(i)] Stock was given to creditors in full settlement of their account.
[(ii)] Investments were taken over by Manav at 120% of book value.
[(iii)] Bad debts amounted to ₹ 2,00,000.
[(iv)] Machinery was realised at 50% discount.
[(v)] Realisation expenses amounted to ₹ 1,00,000 which were paid by Namit.
Prepare Realisation Account.
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Always adjust assets taken over by partners at agreed value and remember to settle creditors against assets if given.
Updated On: Jul 7, 2025
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Solution and Explanation
Realisation Account
| Particulars | ₹ | Particulars | ₹ |
|---|---|---|---|
| To Machinery A/c (₹8,00,000 × 50%) | 4,00,000 | By Bank (Machinery realised) | 4,00,000 |
| To Debtors A/c | 12,00,000 | By Manav (Investments taken over) | 6,00,000 |
| To Stock A/c | 3,00,000 | By Creditors A/c (stock settled) | 3,00,000 |
| To Investments A/c | 5,00,000 | ||
| To Bank A/c (expenses paid by Namit) | 1,00,000 | ||
| To Loss transferred: | |||
| Manav’s Capital A/c (3/5 of ₹9,00,000) | 5,40,000 | ||
| Namit’s Capital A/c (2/5 of ₹9,00,000) | 3,60,000 | ||
| Total | 29,00,000 | Total | 13,00,000 |
Working:
- Machinery realised = ₹4,00,000 (i.e. ₹8,00,000 × 50%)
- Investments taken over = ₹6,00,000 (i.e. ₹5,00,000 × 120%)
- Creditors settled through Stock = ₹3,00,000
- Bad debts = ₹2,00,000 (deducted from Debtors)
- Realisation expenses = ₹1,00,000
- Total Loss = ₹9,00,000
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