At dissolution, an asset with a book value of Rs. 100,000 is sold for Rs. 80,000. A liability of Rs. 30,000 is settled for Rs. 28,000, with no other realization items. What is the result on the Realisation Account?
Correct answer: C. Loss of Rs. 18,000
- A. Profit of Rs. 18,000
- B. Profit of Rs. 22,000
- C. Loss of Rs. 18,000
- D. Loss of Rs. 22,000
Explanation
The asset produces a loss of Rs. 20,000 because it is sold below book value. Settling the liability for Rs. 2,000 less than its recorded amount produces a gain. The net result is a realization loss of Rs. 18,000.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? support@testustad.com
About Partnership Accounts
Partnership accounts cover the partnership agreement, capital and current accounts, profit and loss appropriation, salaries, interest on capital, interest on drawings and profit-sharing ratios. They also address changes in partnership, including admission, retirement, goodwill, revaluation, dissolution and the settlement of partners’ balances.
Practise Partnership Accounts
34 free Partnership Accounts MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Accounting questions like this
Accounting is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Partnership Accounts questions
A partner withdraws Rs. 12,000 at the beginning of each month. If the annual interest rate on drawings is 10%, what is the interest on drawings for the year?
On the admission of a new partner, a credit balance in the Revaluation Account is transferred to the old partners in which ratio?
A and B share profits in the ratio of 3:2. C is admitted for a 1/5 share, taken equally from A and B, and brings Rs. 50,000 as goodwill premium in cash. How much of the premium is credited to A?
A, B and C share profits in the ratio of 3:2:1. B retires, and A and C agree to share future profits in the ratio of 2:1. What is the gaining ratio of A and C?
A partnership deed is silent about interest on partners' capital. Under the usual legal rule, which treatment applies?
In partnership accounts, a partner's salary is generally treated as which type of item?