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Archana, Vandana, and Arti were partners in a firm sharing profits and losses in the ratio \(5 : 3 : 2\). Their Balance Sheet as at 31st March, 2023 was as follows: \[ \begin{array}{|l|r|l|r|} \hline Liabilities & Amount (\rupee) & Assets & Amount (\rupee)
\hline \text{Capitals:} & & \text{Investments} & 80,000
\quad \text{Archana} & 80,000 & \text{Plant} & 1,00,000
\quad \text{Vandana} & 70,000 & \text{Stock} & 40,000
\quad \text{Arti} & 60,000 & \text{Debtors} & 50,000
\text{General Reserve} & 30,000 & \text{Cash at Bank} & 30,000
\text{Creditors} & 60,000 & &
\hline Total & 3,00,000 & Total & 3,00,000
\hline \end{array} \] \vspace{0.5cm} The firm was dissolved on the above date: (i) Assets were realised as follows: \[ \text{Debtors = \rupee40,000}, \quad \text{Stock = \rupee50,000}, \quad \text{Plant = \rupee60,000}. \] (ii) \(25\%\) of the investments were taken over by Vandana at \rupee18,000. Remaining investments were taken over by Archana at \(10\%\) less than book value. (iii) Expenses of realisation \rupee20,000 were paid by Arti. Prepare Realisation Account. \vspace{0.5cm}

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In a Realisation Account, assets are transferred to the debit side, and liabilities are transferred to the credit side. Realisation expenses and profit/loss are adjusted through capital accounts.
Updated On: Jan 13, 2026
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Solution and Explanation

Realisation Account

Particulars Amount (₹) Particulars Amount (₹)
To Sundry Assets: By Creditors (Paid) 60,000
   Investments 80,000 By Cash (Debtors Realised) 40,000
    Plant 1,00,000 By Cash (Stock Realised) 50,000
    Stock 40,000 By Cash (Plant Realised) 60,000
    Debtors 50,000 By Vandana (Investments) 18,000
By Archana (Investments) 54,000
To Cash (Realisation Expenses) 20,000
To Capital Accounts:
    Archana (Profit Share) 12,000
    Vandana (Profit Share) 7,200
    Arti (Profit Share) 4,800
Total 3,54,000 Total 3,54,000

Working Notes:

  1. Realisation of Investments:
    25% of investments = \( \frac{25}{100} \times 80,000 = ₹20,000 \)
    Taken over by Vandana at ₹18,000
    Remaining 75% = ₹60,000
    Taken over by Archana at 10% less = ₹54,000
  2. Profit on Realisation:
    Total Realisation = ₹60,000 + ₹50,000 + ₹40,000 + ₹18,000 + ₹54,000 = ₹2,22,000
    Less: Creditors + Expenses = ₹60,000 + ₹20,000 = ₹80,000
    Profit on Realisation = ₹2,22,000 − ₹80,000 = ₹42,000
  3. Profit Sharing (Ratio 5 : 3 : 2):
    Archana = \( \frac{5}{10} \times 42,000 = ₹21,000 \)
    Vandana = \( \frac{3}{10} \times 42,000 = ₹12,600 \)
    Arti = \( \frac{2}{10} \times 42,000 = ₹8,400 \)
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