Question

At the time of dissolution of a firm, the total assets were ₹ 6,00,000 and outside liabilities were ₹ 2,40,000. If assets realised ₹ 7,20,000 and realisation expenses of ₹ 8,000 were paid, the profit or loss on realisation will be:

• A. Loss ₹ 1,20,000
• B. Profit ₹ 1,20,000
• C. Loss ₹ 1,12,000
• D. Profit ₹ 1,12,000

Hint:

Always account for realisation expenses and liabilities while calculating profits or losses during the dissolution of a firm.

Answer 1

The Correct Option is D

To determine the profit or loss upon realization, apply the formula: \[ \text{Profit or Loss on Realisation} = \text{Total Realisation} - (\text{Outside Liabilities} + \text{Realisation Expenses}) \] Insert the provided figures: \[ \text{Total Realisation} = ₹ 7,20,000 \] \[ \text{Outside Liabilities} = ₹ 2,40,000, \quad \text{Realisation Expenses} = ₹ 8,000 \] \[ \text{Profit or Loss on Realisation} = ₹ 7,20,000 - (₹ 2,40,000 + ₹ 8,000) \] \[ \text{Profit or Loss on Realisation} = ₹ 7,20,000 - ₹ 2,48,000 = ₹ 4,72,000 \] The profit on realization amounts to ₹ 4,72,000. However, after deducting the initial total assets (₹ 6,00,000), the net profit is calculated as: \[ ₹ 7,20,000 - ₹ 6,00,000 - ₹ 8,000 = ₹ 1,12,000 \] Consequently, the correct response is (D) Profit ₹ 1,12,000.