Simerpreet
Helpful
In: >

What is recorded on the credit side of a Realisation account?

What is recorded on the credit side of a Realisation account?
Share

    You must login to add an answer.

    Need An Account,

    1 Answer

    2. Realisation account 

      A realisation account is a nominal account prepared at the time of dissolution of a business.  All the assets and liabilities except cash and bank balance are transferred to the realisation account. A realisation account is prepared to calculate the profit or loss on the dissolution or closing of the firm.

      All the assets are transferred to the debit of the realisation account and all the liabilities are transferred to the credit of the realisation account. When assets are sold, Cash A/c is debited and Reliastion A/c is credited and when liabilities are paid off, Cash A/c is credited and Realisation A/c is credited.

      If the credit side exceeds the debit side of the realisation account, it results in profit. In contrast, if the debit side exceeds the credit side of the realisation account, it results in a loss. in case of profit, the Capital account is credited and in case of loss, the Capital account is debited.

       

      Credit side of realisation account

      • Liabilities: All the liabilities including sundry creditors, outstanding expenses, bills payable, loans and advances, bank overdrafts and cash credit are transferred to the credit side of the realisation account. Capital account of partners, profit and loss balance and loans from partners are not transferred.
        • Accounting entry for this is as follows:

      Liabilities A/c Dr…..

      To Realisation A/c …..

      (All the liabilities transferred to realisation account)

      • Provisions: All the provisions including provision for doubtful debts and provision for taxation are transferred to the credit side of the realisation account.
        • Accounting entry for this is as follows:

      Provision A/c Dr…..

      To Realisation A/c …..

      (All the provisions transferred to the realisation account)

      • Cash and bank A/c: Sale proceeds of all the assets including Land and building, Plant and machinery, furniture, stock, debtor and investment are transferred to the credit side of the Realisation account.
        • Accounting entry for this is as follows:

      Bank A/c Dr…..

      To Realisation A/c …..

      (Asset sold for cash)

      • Loss on realisation: If the debit side of the realisation account exceeds the credit side, it results in loss then the capital account is debited.
        • Accounting entry for this is as follows:

      Capital A/c Dr…..

      To Realisation A/c …..

      (Being loss transferred to the capital account)

       

      The debit side of the realisation account

      All the assets including Land and building, Plant and machinery, furniture, stock, debtor and investment are transferred to the debit of the realisation account and payment of outside liabilities is also recorded on the debit side of the realisation account. Payment made for dissolution expenses is also recorded on the debit side of the realisation account.

       

      Format for realisation Account is as under:

      Realisation A/c
      Particulars Amount Particulars Amount
      To Land & Building By Provision for Doubtful Debts A/c
      To Plant & Machinery By Sundry Creditors A/c
      To Furniture By Bills Payable A/c
      To Debtors By Outstanding Expenses A/c
      To Goodwill A/c By Bank Loan, Overdraft, Cash Credit A/c
      To Investment A/c By Bank/ Cash A/c (Assets realized):
      To Bank/ Cash A/c (Liabilities Paid): Land and Building
      Sundry Creditors Plant and Machinery
      Bill Payable Furniture
      Outstanding Expenses Stock
      Bank Loan, Debtors
      Overdraft, Bad Debts recovered
      Cash Credit Investment
      To Bank/ Cash A/c By Partner’s Capital A/cs
      (Realisation Expenses) (assets taken over)
      To Partner’s Capital A/c By Partner’s Capital A/cs
      (Realisation Expenses) (Loss on Realisation)
      To Partner’s Capital A/cs
      (Profit on Realisation)
      Total Total

       

      • 0

    Related Questions

    Most Helping Users

    Astha

    Astha

    Leader
    Simerpreet

    Simerpreet

    Helpful
    AbhishekBatabyal

    AbhishekBatabyal

    Helpful