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Question

If total assets are Rs. 5,00,000; total liabilities are Rs. 1,00,000; amount realised on sale of assets is Rs. 4,20,000 and realisation expenses are Rs. 5,000, what will be the profit or loss on realisation?


Solution

Profit or loss on realisation may be calculated by preparing a Realisation Account as follows:

Dr.                            REALISATION ACCOUNT                            Cr.

ParticularsAmount (Rs.)ParticularsAmount (Rs.)Assets5,00,000Liabilities1,00,000Bank (liabilities paid)1,00,000Bank (Assets realised)4,20,000Bank (expenses of realisation)5,000Capital A/cs(Loss on realisation)85,000¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯6,05,000––––––––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯6,05,000––––––––––––––––

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