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
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.