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When the firm is dissolved, its books of account are to be closed and the profit or loss arising on realisation of its assets and discharge of liabilities is to be computed. For this purpose, a Realisation Account is prepared to ascertain the net effect (profit or loss) of realisation of ‘ assets and payment of liabilities which may be is transferred to partner’s capital accounts in their profit sharing ratio.

Hence, all assets (other than cash in hand bank balance and fictitious assets, if any), and all external liabilities are transferred to this account. It also records the sale of assets, and payment of liabilities and realisation expenses; The balance in this account is termed as profit or loss on realisation which is transferred to partners’ capital accounts in thier profit sharing ratio

For settlement with the creditor through transfer of assets when a creditor accepts an asset in full and final settlement of his account, journal entry needs to be recorded. But, if the creditor accepts an asset only as part payment of his/her dues, the entry will be made for cash payment only. For example, a creditor to whom Rs. 10,000 was due accepts office equipment worth Rs 8,000 and is paid Rs. 2,000 in cash, the following entry shall be made for the payment of Rs. 2,000 only.

Realisation A/c Dr.

To Bank A/c

However, when a creditor accepts an asset whose value is more than the amount due to him, he/she will pay cash to the frim for the difference for which the entry will be:

BankA/c Dr

To Realisation A/c

For payment of realisation expenses

(a) When some expenses are incurred and paid by the firm in the process of realisation of assets and payment of liabilities: 

Realisation A/c Dr. 

To Bank A/c.

1.False, 

2.False,

Realisation Profit

Explanation: Credit balance in Realisation Account is regarded as ‘Profit on Realisation’. It arises when the credit side of Realisation A/c is more than the debit side. This profit is distributed among all the partners in their profit-sharing ratio.

1.True, 

2. True,

When a firm gets into the situation of dissolution, first of all the amount received from the sale of firm’s assets are utilised to pay the creditors. After that, if the sale receipts of assets fall short, then partners’ private assets are used for settling the dues of the firm’s creditors. Even if some portion of the amount due to creditors is left unpaid, then there arises deficiency of creditors. 

This deficiency is handled in the following two ways 

(i) In first case, deficiency is transferred to the Deficiency Account. 

(ii) In second case, the deficiency is transferred to the partner’s capital account. In first case, a separate account is prepared for the firm’s creditors. Then in ‘ order to ascertain the firm’s cash balance accruing from the sale of the firm’s assets and partners’ private assets, cash account is prepared. After ascertaining the cash availability with the firm, the creditors and the external liabilities are paid proportionately (partially). The remaining unpaid creditors or the deficiency is transferred to the Deficiency Account. 

In the second case, the creditors are paid by the cash available with the firm including the partners’ individual contribution. The deficiency or unpaid creditors amount .is transferred to the partner’s capital account. Thus, the deficiency of the creditors is borne by all the partners in their profit sharing ratio. If any partner becomes insolvent and is unable to bear the deficiency, then this will be regarded as a capital loss to the firm. ‘ If the partnership deed is silent, about such capital loss in the fact of insolvency of a partner, the deficiency on the insolvent partner’s capital ’ account must be borne by the other solvent partners, in proportion to their capital. In that case, we should apply Garner vs Murray decision in solving problems in partnership.

d. Partner’s Capital Account

To give the accounting effects of the money realised and amount paid during dissolution of partnership firm, the realisation account is opened.

Realisation Account is opened at the time of dissolution of the partnership firm.

Dissolution of the partnership firm means complete closure of business activities and stoppage of partnership relations among all the partners.

i. (c) Realisation Account

ii. (b) Cash/Bank Account

iii. (b) profit sharing ratio

iv. (b) debited

v. (b) Realisation Account

Realisation Account is opened to determine the amount of profit or loss from the realisation of assets and payment of liabilities at the time of dissolution of a partnership firm.

In case of dissolution, assets and liabilities are transferred to Realisation A/c.

Explanation: All the assets (except cash or bank balances) are transferred to the debit side, whereas all the liabilities (except bank overdraft) are transferred to the credit side of Realisation Account. Thereafter, at the time of realisation, the assets so realised are shown on the credit side and the settlement of liabilities is shown on the debit side.

Distribution of ₹ 6,000 in 3 : 2 : 1 ratio 6,000 × \(\frac{3}{6}\) = ₹ 3,000, 6,000 × \(\frac{2}{6}\) = ₹ 2,000, 6,000 × \(\frac{1}{6}\) = ₹ 1,000

Amount of realisation profit ₹ 3,000, ₹ 2,000 and ₹ 1,000 is to be credited to Partner’s Capital A/c respectively.

An account which is prepared at the time of dissolution to give the accounting treatments to dispose off assets and payments of liabilities is known as Realisation Account.

Dissolution expenses are credited to Cash/Bank A/c.

Explanation: Payment of realisation expenses results in outflow of cash. Therefore, they are credited to Cash/Bank A/c (as these lead to decrease in cash balance).

Partner’s loan appearing in the Balance Sheet is not transferred to Realisation Account. In fact, a separate account named as Partner’s Loan Account is maintained. At the time of repayment of partner’s loan, Partner’s Loan A/c is debited and Cash A/c is credited.

Capital Deficiency

Explanation: The debit balance of an insolvent partner’s capital account is known as capital deficiency. This deficiency is to be borne by all the solvent partners in their profit-sharing ratio.

There is the following difference between Realisation Account and Revaluation Account

If any asset is taken over by a partner from the firm, then his Capital A/c will be debited.

Explanation: When an asset is taken over by a partner, then the Realisation A/c is credited and the Concerned Partner’s Capital A/c is debited with the agreed price at which the asset is taken over by him.

In case of dissolution of a firm, the firm ceases to conduct business and has to settle its accounts. For this purpose, it disposes off all its assets for satisfying all the claims against it. In this context, it should be noted that, subject to agreement among the partners, the following rules as provided in Section 48 of the Partnership Act, 1932 shall apply. As per those rules, 

The following order of settlement will be followed. 

(i) Treatment of Losses: Note Losses: including deficiencies of capital, shall be paid 

(a) First out of profits, 

(b) Next out of capital of partners, and 

(c) Lastly, if necessary, by the partners individually in their profits sharing ratio. 

(ii) Application of Assets: The assets of the firm including any sum contributed by the partners to make up deficiencies of capital, shall be applied in the following manner and order 

(a) In paying the debts of the firm to the third parties; 

(b) In paying each partner proportionately what is due to him/her from the firm for advances as distinguished from capital (i.e., partner’s loan); 

(c) In paying to each partner proportionately what is due to him on account of capital; and 

(d) The residue, if any, shall be divided among the partners in their profit sharing ratio.

1. Interest

2. Out of Capital

3. Dividend Mandate

4. Dividend Mandate

The capital deficiency of an insolvent partner is borne by all other solvent partners in their profit-sharing ratio.

This statement is True.

Debit balance of Partners’ Capital Account means the excess of drawings than the capital credit balance. In the case of an insolvent partner, the debit balance of the Capital Account means liabilities which he cannot pay. It means capital deficiency.

Deficiency of Insolvent partner will be suffered by solvent partners in their profit-sharing ratio.

Explanation: If deficiency of insolvent partner (i.e. the debit balance in the insolvent partner’s capital account) is treated as an ordinary loss, then this loss is to be borne by the other solvent partners in their profit-sharing ratio.

At the time of dissolution, bad debts return which is written off earlier would be recorded on credit side of Realisation Account.

1. False, 

2. False, 

Partner’s Capital A/c Dr

To Bank A/c

The capital deficiency of insolvent partners should be borne by the solvent partners.

The correct answer is: Capital

The balance on the Realisation Account is transferred to Partners Capital/Current Accounts in their profit sharing ratio.

Realisation Loss

Explanation: Debit balance in Realisation Account is regarded as ‘Loss on Realisation’. It arises when the debit side of Realisation A/c is more than its credit side. This loss is borne by all the partners’ in their profit-sharing ratio.

Cash/Bank balance, Reserve funds, Profit and Loss A/c balance, Partners’ Loan accounts, etc. are not transferred to Realisation Account.

(b) Partners’ capital account

Not recorded

For realisation of any unrecorded assets including goodwill, if any 

Bank A/c Dr. To Realisation A/c 

For settlement of any unrecorded liability Realisation A/c Dr. 

To Bank A/c

Pay, Realisation

Debit, Realisation

This statement is True.

Cash or bank balance are liquid assets. They cannot be sold or realised. The cash and/or bank balances are recorded in the Cash and/or Bank Account. All cash and/or bank transactions, at the time of Realisation, are recorded in the Cash and Bank Accounts. Therefore, Cash and Bank balances are not transferred to Realisation Account.

External, Credit, Realisation

⦁     मझोले और बड़े किसानों के पास अधिक भूमि होती है अर्थात् उनकी जोतों का आकार बड़ा होता है जिससे वे अधिक उत्पादन करते हैं।

⦁    अधिक उत्पादन होने से वे इसे बाजार में बेचकर धनलाभ प्राप्त करते हैं। इस धन का प्रयोग वे उत्पादन की आधुनिक विधियों को अपनाने में करते हैं।

⦁     इनकी पूँजी छोटे किसानों से भिन्न होती है क्योंकि छोटे किसानों के पास भूमि कम होने के कारण उत्पादन उनके पालन-पोषण के लिए भी कम बैठता है।

⦁    उन्हें आधिक्य प्राप्त न होने के कारण बचते नहीं होती हैं इसलिए खेती के लिए उन्हें पूँजी बड़े किसानों या साहूकारों से उधार लेकर पूरी करनी पड़ती है जिस पर उन्हें काफी ब्याज चुकाना पड़ता है जो उन्हें ऋणग्रस्तता के चंगुल में फँसा देता है।

a) जब TR वक्र से गुजरती हुई एक धनात्मक प्रवणता वाली सरल रेखा हो, तो माँग वक्र अर्थात् AR वक्र एक क्षैतिज रेखा होगा।
(b) यह संभव नहीं है जब तक AR = 0 न हो और AR = कीमत = शून्य नहीं हो सकती।

Answer is (A) A + B is symmetric

(i) 1332

The given number = 1332

Sum of its digits = 1 + 3 + 3+ 2 = 9

Which is divisible by 9

1332 is divisible by 9

(ii) 53247

The given number = 53247

Sum of its digits = 5 + 3 + 2 + 4 + 7 = 21

Which is not divisible by 9

53247 is not divisible by 9

(iii) 4968

The given number = 4968

Sum of its digits = 4 + 9 + 6 + 8 = 27

Which is divisible by 9

4968 is divisible by 9

(iv) 200314

The given number = 200314

Sum of its digits = 2 + 0 + 0 + 3 + 1 + 4 = 10

Which is not divisible by 9

Correct option is (A) 3/x

\(3x^{-1}\) = \(\frac{3}{x}\)

Correct option is  A) \(\frac{3}{x}\)

Correct option is (C) 0

\(\sqrt[4]{81}-8\times\sqrt[3]{216}+15\sqrt[5]{32}+\sqrt{225}\)

\(=(3^4)^\frac14-8\times(6^3)^\frac13+15(2^5)^\frac15+(15^2)^\frac12\)

\(=(3)^{4\times\frac14}-8\times(6)^{3\times\frac13}+15(2)^{5\times\frac15}+(15)^{2\times\frac12}\)

\(=3-8\times6+15\times2+15\)

= 3 - 48 + 30 + 15

= 48 - 48 = 0

Correct option is  C) 0