Calculation of Profit or Loss of Realisation Account

Given:
Creditors = 70000
Partners Capital = 120000
Cash Balance = 10000
Other Assets Realised = 150000

Step 1: Total Realisation
Total Realisation = Cash Balance + Other Assets Realised
Total Realisation = 10000 + 150000
Total Realisation = 160000

Step 2: Total External Liabilities
Total External Liabilities = Creditors
Total External Liabilities = 70000

Step 3: Partners' Share in Profit or Loss
Partners' Share in Profit or Loss = Partners Capital
Partners' Share in Profit or Loss = 120000

Step 4: Calculation of Profit or Loss
Profit or Loss = Total Realisation - Total External Liabilities - Partners' Share in Profit or Loss
Profit or Loss = 160000 - 70000 - 120000
Profit or Loss = -70000

Therefore, the Profit or Loss of Realisation Account is -70000.

Explanation:

When a partnership firm is dissolved, its assets are sold and liabilities are paid off. The remaining amount, if any, is distributed among the partners according to their profit and loss sharing ratio. The Profit or Loss of Realisation Account is calculated to determine whether there is any profit or loss in the process of realisation of assets and payment of liabilities.

In this question, the Cash Balance and Other Assets Realised are added to calculate the Total Realisation. The Total External Liabilities are the creditors. The Partners' Share in Profit or Loss is the Partners Capital. The Profit or Loss is calculated by subtracting the Total External Liabilities and Partners' Share in Profit or Loss from the Total Realisation.

In this case, the Total Realisation is 160000, the Total External Liabilities is 70000, and the Partners' Share in Profit or Loss is 120000. Therefore, the Profit or Loss is -70000, which means that there is a loss in the process of realisation of assets and payment of liabilities. This loss will be borne by the partners in their profit and loss sharing ratio.

Creditors are 70,000₹
assets realised are 1,50,000₹ .
Since , we have enough money we will consider that creditors are paid in full .
Realisation PROFIT = Asset realised amount - Creditors payment amount = 1,50,000 - 70,000 = 80,000₹