Question

On dissolution of a firm, its Balance Sheet revealed total creditors ₹ 50,000; Total Capital ₹ 48,000; Cash Balance ₹ 3,000. Its assets were realised at 12% less. What will be loss on realisation?

Answer 1

Creditors = ₹ 50,000

Partners’ Capital = ₹ 48,000

Cash Balance = ₹ 3,000

Assets realized at 12% less (i.e., 88% of their book value)

Assets = Liabilities + Capital

= ₹ 50,000 + ₹ 48,000

= ₹ 98,000

So, total assets (including cash) = ₹ 98,000.

Out of this, Cash Balance = ₹ 3,000.

Therefore, Other Assets = ₹ 98,000 – ₹ 3,000

= ₹ 95,000

Realisation at 12% less → 88% of ₹ 95,000

= `95,000xx88/100`

= ₹ 83,600

Creditors = ₹ 50,000.

After payment, balance cash = ₹ 86,600 – ₹ 50,000

= ₹ 36,600

Partners’ Capital = ₹ 48,000

Cash left = ₹ 36,600

So, Loss on Realisation = ₹ 48,000 – ₹ 36,600

= ₹ 11,400