Question

On firm’s Dissolution, firm had Patents of ₹ 1,00,000, which were sold for ₹ 40,000. Realised amount will be credited to ______.

Options

• Cash A/c

• Realisation A/c

• Profit & Loss A/с.

• Patents A/c

Answer 1

On firm’s Dissolution, firm had Patents of ₹ 1,00,000, which were sold for ₹ 40,000. Realised amount will be credited to Realisation A/c.

Explanation:

During dissolution, individual asset accounts like Patents are first closed by transferring them to the Realisation Account. When the patents are actually sold for ₹ 40,000, the cash received is a business realization gain. According to double-entry accounting rules, the Cash or Bank Account is debited because money is coming in, and the Realisation Account is credited to record the asset’s recovery value.