Question

On dissolution of a firm, an unrecorded furniture of the value of ₹ 5,000 was taken up by a partner for ₹ 4,300. Which account will be credited and by how much amount?

Options

• Cash Account by ₹ 4,300

• Realisation Account by ₹ 700

• Partner’s Capital Account by ₹ 5,000

• Realisation Account by ₹ 4,300

Answer 1

Realisation Account by ₹ 4,300

Explanation:

When a partner takes over an unrecorded asset during dissolution, the realisation account is credited by the amount actually agreed for the asset, which is ₹ 4,300 in this case. The corresponding debit is made to the partner’s capital account to reflect that the partner has assumed the asset in lieu of cash, and the difference between the book value (₹ 5,000) and taken-over value (₹ 4,300), i.e., ₹ 700, is treated as a loss on realisation and shared among all partners according to their profit-sharing ratio.