A and B are equal partners. When partnership was dissolved their capitals are Rs. 30,000 and Rs. 40,000 respectively. After all assets are sold and liabilities paid, there is cash balance of Rs. 60,000. The amount of profit or loss on realisation is:
A. Profit of Rs. 10,000
B. Profit of Rs. 20,000
C. Profit of Rs. 30,000
D. Loss of Rs. 10,000
Answer: Option D
This Question Belongs to Commerce >> Accounting
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Accounting provides information on
A. Cost and income for managers
B. Company's tax liability for a particular year
C. Financial conditions of an institutions
D. All of the above
The long term assets that have no physical existence but are rights that have value is known as
A. Current assets
B. Fixed assets
C. Intangible assets
D. Investments
The assets that can be converted into cash within a short period (i.e. 1 year or less) are known as
A. Current assets
B. Fixed assets
C. Intangible assets
D. Investments
Patents, Copyrights and Trademarks are
A. Current assets
B. Fixed assets
C. Intangible assets
D. Investments
To calculate the profit or loss on realization, we need to compare the total amount realized from the sale of assets to the total amount of liabilities paid.
The total capital of the partnership is Rs. 30,000 + Rs. 40,000 = Rs. 70,000.
Given that the cash balance after settling liabilities is Rs. 60,000, we can determine the profit or loss on realization by subtracting the total capital from the cash balance:
Profit or Loss on Realization = Cash Balance - Total Capital
Profit or Loss on Realization = Rs. 60,000 - Rs. 70,000
Profit or Loss on Realization = -Rs. 10,000
Therefore, the correct answer is D. Loss of Rs. 10,000.