On 31st March, 1995 the following balances of accounts appeared in the books of a firm Capital Account Rs. 2,00,000 General Reserve Rs. 50,000; Sundry Creditors Rs. 50,000 and Cash in hand Rs. 10,000. The firm is dissolved, and the assets realised Rs. 1,25,000. The loss on realisation is:

The correct answer is: C. Rs. 1,15,000

The loss on realisation is calculated as follows:

Total assets – Total liabilities = Loss on realisation

1,25,000 – (2,00,000 + 50,000 + 50,000) = 1,15,000

Therefore, the loss on realisation is Rs. 1,15,000.

Here is a brief explanation of each option:

• Option A: Rs. 1,75,000

This option is incorrect because the total assets are only Rs. 1,25,000. Therefore, the loss on realisation cannot be more than Rs. 1,25,000.

• Option B: Rs. 1,65,000

This option is incorrect because the total liabilities are only Rs. 1,00,000. Therefore, the loss on realisation cannot be more than Rs. 1,00,000.

• Option C: Rs. 1,15,000

This option is correct because it is the only option that is within the range of the total assets and the total liabilities.

• Option D: Rs. 1,05,000

This option is incorrect because the total assets are only Rs. 1,25,000. Therefore, the loss on realisation cannot be less than Rs. 1,25,000.