Question

K and A are partners in a firm. They share profits and losses in the ratio of 4:1. They decide to dissolve the firm. K Capital - Rs. 1,60,000, A Capital - Rs. 1,00,000, Total assets - Rs. 3,95,000, Total liabilities - Rs. 1,35,000. On dissolution assets realized Rs. 3,50,000 & liabilities including unrecorded liability settled at Rs. 1,50,000. Net profit or loss on realization = ?

• A. Profit 30,000
• B. Loss 60,000
• C. Profit 60,000
• D. Loss 30,000

Answer 1

The correct option is B Loss 60,000

Realization Account

Particulars	Amount	Particulars	Amount
To Sundry Assets A/c	395000	By Sundry Liabilities A/c	135000
To Bank A/c (Liabilities paid)	150000	By Bank A/c (Assets realized)	350000
		By loss (transferred to partner's capital account) K - 48000 A - 12000	60000
Total	545000	Total	545000