Financial Accounting, SS 2, Second Term Week 1
Topic: Realization Account
Contents
- Concept of realization Account
- Realization Account Format
Concept of Realization Account
Cash account :the debit side of the cash account shows the actual cash transaction i.e cash realized in the process of dissolution as found on the credit side of realization account ,while the credit side of the cash account will have the cost of dissolution, amount paid to creditors. the difference between the two side is the capital of the partners.
Reason for Realization Account
- To ascertain the profit or loss due to the realization of assets and liabilities
- To record the sale of assets and discharge of liabilities
- It is prepared on dissolution of a firm when all assets are sold and all liabilities are paid off
Dr Cr
Book value of assets Amount realized from sales
Land &building x Land and building x
Equipment x Equipment x
Debtors x Debtors x
Stock x Stock x
Plant and machinery x Plant and machinery x
Motor vehicle x Motor vehicle x
Cost of dissolution x Discount received x
Share of profit by partners
Cash book format
DR CR
Balance b/f x Dissolution cost x
Realization account Creditors x
Plant and machinery x Settlement of loan x
Debtors x Capital
Motor vehicle x Partner 1 x
Stock x Partner 2 x
Equipment x Partner 3 x
For more note; see: https://passnownow.com/classwork-support/
