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.

Hint:

Always adjust assets taken over by partners at agreed value and remember to settle creditors against assets if given.

Answer 1

Realisation Account

Particulars	Amount (₹)	Particulars	Amount (₹)
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

Calculations:

• Machinery realisation value = ₹4,00,000 (₹8,00,000 × 50%)
• Investments taken over value = ₹6,00,000 (₹5,00,000 × 120%)
• Stock used to settle Creditors = ₹3,00,000
• Unrecoverable Debtors (Bad Debts) = ₹2,00,000
• Realisation Expenses = ₹1,00,000
• Total Loss on Realisation = ₹9,00,000