Question

On the dissolution of the partnership firm of Puneet and Binny, an unrecorded asset of ₹ 56,000 was given to an unrecorded creditor of ₹ 70,000 in settlement of his claim of ₹ 50,000 and the balance was paid to him in cash. Realisation Account will be ______ by ______.

Options

• debited, ₹ 20,000

• credited, ₹ 20,000

• debited, ₹ 14,000

• credited, ₹ 14,000

Answer 1

On the dissolution of the partnership firm of Puneet and Binny, an unrecorded asset of ₹ 56,000 was given to an unrecorded creditor of ₹ 70,000 in settlement of his claim of ₹ 50,000 and the balance was paid to him in cash. Realisation Account will be debited by ₹ 20,000.

Explanation:

1. Cash Payment:

Any remaining balance of the creditor’s claim paid in cash must be recorded.

Total Creditor Claim = ₹ 70,000

Amount settled by Asset = ₹ 50,000

Balance paid in Cash = ₹ 70,000 − ₹ 50,000

= ₹ 20,000

2. Journal Entry:

Realisation A/c  ...Dr. ₹ 20,000

    To Cash/Bank A/c ₹ 20,00