Question

Sandhya and Suman were partners in a firm sharing profits and losses in the ratio of 3 : 5. They decided to dissolve the firm on 31st March, 2024. On the date of dissolution, the Balance Sheet of the firm showed a balance of ₹ 80,000 in sundry debtors and a balance of ₹ 5,000 in provision for bad debts account. How much amount will be transferred to Realisation Account to close Sundry Debtors Account?

Options

• ₹ 75,000

• ₹ 85,000

• ₹ 80,000

• ₹ 90,000

Answer 1

₹ 80,000

Explanation:

During the dissolution of a firm, assets must be transferred to the Realisation Account at their gross book value (original cost) rather than their net value. Sundry Debtors (₹ 80,000) and the Provision for Bad Debts (₹ 5,000) are maintained as two separate accounts in the ledger. To close them properly, the full gross amount of ₹ 80,000 is debited to the Realisation Account, while the ₹ 5,000 provision is credited to the Realisation Account separately. Deducting the provision beforehand is incorrect; hence, exactly ₹ 80,000 is needed to close the Sundry Debtors Account.