Distinguish between : First and Second method of disposal of real… - Vidyadip

Question

Distinguish between : First and Second method of disposal of realisation account.

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Answer

Difference between first and second method of disposal of realisation account is as under:

Points	First Method	Second Method
$1.$ Realisation Account	After closing the assets and liabilities accounts, they are transferred to Realisation account.	In Realisation Account, assets and liabilities accounts are not transferred.
$2.$ Accounts	Liabilities and Assets accounts	Accounts of Liabilities and are closed. Assets are not closed.
$3.$ Realisation of Assets	On credit side of Realisation Account, the realised value on sale of asset are recorded.	Realised value of the assets is credited to assets account and the balance is transferred to Realisation Account.
$4.$ Payment of Liability	On debit side of Realisation Account payment for the liability is shown.	If liability is debited to that liability A/c. the amount paid towards it is transferred to Realisation Account
$5.$ Circumstances	If the liabilities are paid immediately and the assets are realised immediately on dissolution, then this method is suitable.	If the payment of liability and the realisation of assets are made in instalments on disso lution, then this method is suitable.

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