The correct answer is: D. None of the above
Statement 1 is incorrect. Realisation account is an account used to record the sale of assets and the distribution of the proceeds to the partners. Revaluation account is an account used to record the increase or decrease in the value of assets due to revaluation.
Statement 2 is incorrect. While preparing cash account or bank account (dissolution), the debit side shows the cash received and the credit side shows the cash paid.
Statement 3 is incorrect. Items appearing in the balance sheet are posted at two places, once in the debit side of the ledger account and once in the credit side of the ledger account.
Here is a more detailed explanation of each statement:
Statement 1: Realisation account and revaluation account are the same.
Realisation account is an account used to record the sale of assets and the distribution of the proceeds to the partners. Revaluation account is an account used to record the increase or decrease in the value of assets due to revaluation.
Realisation account is a temporary account, while revaluation account is a permanent account. Realisation account is closed at the end of the accounting period, while revaluation account is not closed.
The following are the entries in the realisation account:
- Debit: Assets sold
- Credit: Cash received from the sale of assets
- Credit: Partners’ capital accounts (for the distribution of the proceeds)
The following are the entries in the revaluation account:
- Debit: Assets whose value has increased
- Credit: Assets whose value has decreased
Statement 2: While preparing cash account or bank account (dissolution), the debit and credit side are same.
While preparing cash account or bank account (dissolution), the debit side shows the cash received and the credit side shows the cash paid.
The following are the entries in the cash account:
- Debit: Cash received
- Credit: Cash paid
The following are the entries in the bank account:
- Debit: Cheques received
- Credit: Cheques issued
Statement 3: Items appearing in the balance sheet are posted at one place only.
Items appearing in the balance sheet are posted at two places, once in the debit side of the ledger account and once in the credit side of the ledger account.
The following are the entries in the ledger account for an asset:
- Debit: Cost of the asset
- Credit: Depreciation
- Credit: Gain on sale of asset
The following are the entries in the ledger account for a liability:
- Debit: Amount borrowed
- Credit: Interest expense
- Credit: Payment of liability