5 Dissolution of a Partnership Firm Q. 1. Manoj and Nand were partners sharing profits in the ratio of 3 : 2. Pass journal entries under following situations at the time of dissolution of firm : () Workmen Compensation Reserve stood at %1,00,000 and there was no liability towards Workmen Compensation. (ii) Workmen Compensation Reserve stood at %1,00,000 and liability in respect of it was acertained at 775,000. (ii) Workmen Compensation Reserve stood at %1,00,000 and liability in respect of it was ascertained at €1,20,000. (@) Workmen Compensation Reserve stood at %1,00,000 and liability in respect of it was ascertained at 71,00,000. SOLUTION : 1. JOURNAL Date Particulars LF. | Dr. ®) | Cr. ®) () Workmen Compensation Reserve A/c Dr. 1,00,000 | To Manoj’s Capital A/c | 60,000 To Nand’s Capital A/c 40,000 (Balance of Workmen Compensation Reserve transferred to Partners’ Capital Accounts in their profit-sharing ratio) (ii) (a)| Workmen Compensation Reserve A/c Dr. 75,000 To Realisation A/c 75,000 (Workmen Compensation Reserve to the extent of liability transferred to Realisation Account) ()| Workmen Compensation Reserve A/c Dr. 25,000 To Manoj’s Capital A/c 15,000 To Nand’s Capital A/c 10,000 (Surplus of Workmen Compensation Reserve transferred to Partners’ Capital Accounts in their profit-sharing ratio) Realisation A/c Dr. 75,000 To Bank A/c 75,000 (Payment of liability on account of Workmen Compensation) ©(iii) (a) | Workmen Compensation Reserve A/c Dr. 1,00,000 To Realisation A/c 1,00,000 (Balance of Workmen Compensation Reserve transferred to Realisation Account) (6) | Realisation A/c Dr. 1,20,000 To Bank A/c 1,20,000 (Payment of liability on account of Workmen Compensation) (i) (@| Workmen Compensation Reserve A/c Dr. 1,00,000 To Realisation A/c 1,00,000 (Balance of Workmen Compensation Reserve transferred to Realisation Account) (b) | Realisation A/c Dr. 1,00,000 To Bank A/c 1,00,000 (Payment of liability on account of Workmen Compensation) Q.2. (i) Expenses of realisation %8,000. (ii) Expenses of realisation 10,000 were paid by a partner. (iii) Realisation expenses of %12,000 were to be met by Tushar, a partner, but were paid by the firm. (iv) Suresh, a partner, was paid remuneration of 710,000 and he was to meet all expenses. (v) Viru, a partner, was paid remuneration of £15,000 and he was to meet all expenses. Actual Expenses amounted to £20,000 which were paid by the firm. (vi) Realisation expenses amounting to 15,000 were paid by the firm. 710,000 were to be borne by a partner and the balance by the firm. (vii) Gauri, a partner, was allowed a remuneration of 25,000 and he was to meet all expenses. Firm paid an expense of %5,000. SOLUTION : 2. JOURNAL Date Particulars LF. | Dr. @) | Cr. @) (i [Realisation A/c Dr. 8,000 To Bank A/c 8,000 (Payment of realisation expenses) (if) [Realisation A/c Dr. 10,000 To Partner’s Capital A/c 10,000 (Realisation expenses paid by the partner on behalf of the firm) (iii) | Tushar’s Capital A/c Dr. 12,000 To Bank A/c 12,000 (Realisation expenses paid by the firm on behalf of the partner)(iv) [Realisation A/c . 10,000 To Suresh’s Capital A/c 10,000 (Remuneration allowed to Suresh for dissolution work) (¥)_ | Realisation A/c Dr. 15,000 Viru’s Capital A/c Dr. 5,000 To Bank A/c 20,000 (Remuneration allowed to Viru and excess expenses charged from him) (vi) | Partner’s Capital A/c Dr. 10,000 Realisation A/c Dr. 5,000 To Bank A/c 15,000 (Realisation expenses paid by the firm, Partner’s share debited to his Capital Account and the balance to Realisation A/c) (vii) | Realisation A/c Dr. 25,000 To Gauri’s Capital A/c 20,000 To Bank A/c 5,000 (Remuneration of 325,000 allowed to Gauri and 75,000 paid by the firm deducted out of his share) Q. 3. Pass necessary Journal Entries on the dissolution of a partnership firm in the following cases : (i) L, a partner, was appointed to look after the dissolution process for which he was given a remuneration of 10,000. (ii) Dissolution expenses %8,000 were paid by the partner, M. (iii) Dissolution expenses were 75,000. (iv) P, a partner, was appointed to look after the process of dissolution for which he was allowed a remuneration of 7,000. P agreed to bear the dissolution expenses. Actual dissolution expenses €4,000 were paid by P. (v) N, a partner, was appointed to look after the process of dissolution for which he was allowed a remuneration of €9,000. N agreed to bear the dissolution expenses. Actual dissolution expenses 4,000 were paid by the firm. (vi) Qa partner was appointed to look after the process of dissolution for which he was allowed a remuneration of 718,000. Q agreed to take over stock worth 718,000 as his remuneration. The stock had already been transferred to Realisation Account. (C.B.S.E. 2016, Delhi) SOLUTION : 3. JOURNAL Date Particulars LF.| Dr.®) | C.® (i) | Realisation Ale Dr. 10,000 To L’s Capital A/c 10,000 (Remuneration allowed to L for dissolution work) (i) | Realisation A/c Dr. 8,000 To M's Capital A/c 8,000 (Dissolution expenses paid by Mon behalf of the firm)5.4 SOLUTIONS TO PRACTICAL QUESTIONS (iii) | Realisation A/c Dr. 5,000 To Bank A/c 5,000 (Payment of dissolution expenses) (iv) | Realisation A/c Dr. 7,000 To P’s Capital A/c 7,000 (Remuneration allowed to P for dissolution work) Realisation A/c Dr. 9,000 To N's Capital A/c 5,000 To Bank A/c 4,000 (Remuneration allowed to N and expenses paid by firm on his behalf) (vi) | No Entry 0) Q. 4. The following is the Balance Sheet of A and B as at 31st March, 2018, The profit sharing ratios of the partners are 3 : 2. Liabilities z Assets z Creditors 97,500 | Land & Buildings 30,000 Capital Accounts : Motor Vehicles 18,300 A 85,000 Stock 72,800 B 63,000 | 1,48,000 | Debtors 1,13,200 Less: Provision for Bad Debts 2,450 | 1,10,750 Cash at Bank 13,650 500 The partners decided to dissolve the firm on and from the date of the Balance Sheet. Motor Vehicles and Stock were sold for cash at 16,950 and %77,600 respectively and all Debtors were realised in full. Land & Buildings were sold at %43,500. Creditors were paid off subject to discount of 71,700. Expenses of realisation were 1,250. Prepare Realisation Account, Bank Account and Partners’ Capital Accounts to close the books of the firm as a result of its dissolution. SOLUTION: 4. LEDGER ACCOUNTS Dr. REALISATION ACCOUNT Gr. Particulars z Particulars z To Land & Buildings A/c 30,000 | By Provision for Bad debts A/c 2,450 ‘To Motor Vehicles A/c 18,300 | By Creditors A/c 97,500 To Stock A/c 72,800 | By Bank A/c (Assets Realised) : To Debtors A/c 1,13,200] Motor Vehicles 16,950 To Bank A/c (Creditors Paid off) | 95,800] Stock 77,600 To Bank A/c Land & Buildings 43,500 | 1,38,050 (Expenses of Realisation) 1,250| By Bank A/c ‘To Profit on Realisation : (Realisation of Debtors) 1,13,200 as Capital Ae 11,910PEA noeor sat elec nore FIRM can neewenucemmeneeee 5.5 Bs Capital A/e 2 7,940| 19,850 3,51,200 3,51,200 Dr. CAPITAL ACCOUNTS cr. Particulars A B Particulars A B z z z z To Bank Ale By Balance b/d 85,000| 63,000 (Final Payment) 96,910| 70,940 | By Realisation A/c (Profit) 11,910} 7,940 96,910| 70,940 96,910| 70,940 Dr. BANK ACCOUNT Cr. Particulars z Particulars z To Balance b/d 13,650 | By Realisation A/e To Realisation A/c (Creditors Paid off) 95,800 (Assets Realised) 1,38,050 | By Realisation A/c To Realisation A/c (Expenses of Realisation) 1,250 (Realisation of Debtors) 1,13,200 | By 4’s Capital Ale 96,910 By B’s Capital A/e 70,940 764,900 364,900 Q.5. P, Qand Rare partners sharing profits and losses in the ratio of 2:1: 1. They decide to dissolve their firm on 31-03-2018, the date on which their Balance Sheet stands as under : BALANCE SHEET as at 31.03.2018 Liabilities z Assets z Creditors 80,000 | Bank 30,000 Bills Payable 10,000 | Stock 1,50,000 Loan from P 20,000 | Debtors 88,000 Reserve Fund 8,000 | Less : Provision 8,000} — 80,000 Capital Accounts : Investments 40,000 P Fumiture 30,000 Q Machinery 90,000 R The following additional information is given : (i) Investments are taken over by P at book value. (ii) Furniture is taken over by Q for 20,000. (iii) Creditors were paid off at a discount of 5%.5.6 Stock Debtors Machinery SOLUTIONS TO PRACTICAL QUESTIONS at 80% 265,000 at 30% less. (v) Expenses of realisation amounted to 2,000. Prepare the necessary ledger accounts to close the books of the firm. (iv) Other assets realised as follows : SOLUTION : 5. Dr. REALISATION ACCOUNT Cr. Particulars z Particulars z To Stock 1,50,000 | By Creditors 80,000 To Debtors 88,000 | By Bills Payable 10,000 To Investments 40,000 | By Provision for Doubtful Debts 8,000 To Furniture 30,000 | By P (Investments taken over) 40,000 To Machinery 90,000 | By 0 (Furniture taken over) 20,000 To Bank A/c (Liabilities paid off) By Bank A/c (Assets Realised) : Creditors 76,000 Stock 1,20,000 BP 10,000} 86,000] Debtors 65,000 To Bank A/c Machinery 63,000 | 2,48,000 (Expenses of Realisation) 2,000 | By Loss on Realisation : P’s Capital A/c 40,000 O's Capital A/c 20,000 R’s Capital A/c 20,000 80,000 4,86,000 4,86,000 Dr. P's LOAN ACCOUNT Cr. Particulars z Particulars z To Bank A/c By Balance b/d Dr. CAPITAL ACCOUNTS cr. Particulars | P Q R_| Particulars | P Q R z z z z z z To Realisation /By Balance b/d | 2,00,000] 1,00,000} 2,000 Alc (Invest- By Reserve ments taken Fund 4,000] 2,000] 2,000 over) 40,000 By Bank A/c To Realisation (Amount Ale (Furni- brought in) 16,000 ture taken over) 20,000 To Realisation Alc (Loss) | 40,000) 20,000] 20,000 To Bank A/c (Final Payment) | 1,24,000] 62,000) 2,04,000| 1,02,000} 20,000 2,04,000) 1,02,000| 20,000DISSOLUTION OF A PARTNERSHIP FIRM 5.7 Dr. BANK ACCOUNT Cr Particulars z Particulars z To Balance b/d 30,000 | By Realisation A/c To Realisation A/e Creditors Paid 76,000 (Assets Realised) 2,48,000| —B/P Paid 10,000 86,000 To R’s Capital Alo 16,000 By Realisation A/c (Expenses of Realisation) 2,000 By P’s Loan A/c 20,000 By P's Capital A/c 124,000 By Q's Capital A/c 62,000 2,94,000 Hint : Nothing is mentioned in the question about the payment of B/P and P’s Loan. It will be assumed that full payment will be made thereof. Q. 6. A and B were partners sharing profits and losses in 2 : 1. Their Balance Sheet as at 31st March, 2018 was as follows : Liabilities z Assets z Sundry Creditors 2,10,000| Cash at Bank 60,000 A’s Loan @12% p.a. 50,000 | Sundry Debtors 1,80,000 General Reserve 90,000 | Less : Provision for A’s Capital 4,00,000 Doubtful Debts 10,000 | 1,70,000 B’s Capital 2,50,000 | 6,50,000| Stock 2,00,000 Investments 1,50,000 Plant & Machinery 4,00,000 B's Loan 20,000 10,00,000 10,00,000 Partners decide to dissolve the firm on the above date. Assets and liabilities realised as follows : (@ Plant & Machinery was taken over by A at 60% of the book value, (@) Investments were taken over by B at 120%. (iii) Sundry Creditors were paid off by giving them stock at 75% of the book value and the balance in cash. (iv) Debtors realised 20% less of the amount due from them. (v) 4’s loan was paid off with interest for six months, (vi) Realisation expenses amounted to 71,000. ‘You are required to prepare : (@) Realisation Account (6) A’s Loan Account and B’s Loan Account (c) Partner’s Capital Accounts, and (@) Bank Account.BB eee eee eee SOLUTIONS TO atte cnn SOLUTION : 6. Dr. REALISATION ACCOUNT Cr. Particulars gE Particulars z To Sundry Debtors 1,80,000 | By Sundry Creditors 2,10,000 To Stock 2,00,000 | By Provision for Doubtful Debts | 10,000 To Investments 1,50,000 | By 4’s Capital A/c (Plant & To Plant & Machinery 4,00,000| Machinery taken over) 2,40,000 To Bank A/c (Creditors paid : By B’s Capital A/c 2,10,000 - 1,50,000) 60,000| (Investments taken over) 1,80,000 To Interest on 4’s Loan 3,000 | By Bank (Debtors realised) 1,44,000 To Bank A/c (Realisation Exp.) 1,000 | By Loss on Realisation : A’s Capital A/c 2/3 1,40,000 B’s Capital A/c 1/3 70,000 } 2,10,000 Dr. A’s LOAN ACCOUNT Particulars z Particulars z To Bank A/c 53,000 | By Balance b/d 50,000 By Interest on 4’s Loan 3,000 53,000 Dr. B’s LOAN ACCOUNT Cr. Particulars z Particulars To Balance b/d 20,000 | By B’s Capital A/c 20,000 Dr. CAPITAL ACCOUNTS Cr. Particulars A B Particulars A B z z z z To Realisation A/c [By Balance b/d 4,00,000] 2,50,000 (Plant & Machinery) | 2,40,000 [By General Reserve 60,000| 30,000 To Realisation A/c (Investments) 1,80,000 To B’s Loan A/c 20,000 To Realisation A/c (Loss) 1,40,000] 70,000) To Bank A/c (inal Payment) 80,000] 10,000} 4,60,000| 2,80,000| Dr. BANK ACCOUNT Cr. Particulars z Particulars z To Balance b/d 60,000 | By Realisation A/c To Realisation A/c (Creditors paid) 60,000 (Debtors Realised) 1,44,000 | By 4’s Loan A/c 53,000By Realissation A/c (Exp.) 1,000 By 4’s Capital A/c 80,000 By B's Capital A/c 10,000 2,04,000 000 Q.7. A, Band C were in p artnership sharing profits in the ratio of 2: 1 : 1. Their Balance Sheet showed the following position on the date of dissolution : Liabilities z Assets z Creditors 40,000 | Fixed Assets 50,000 Bills Payable 10,000 stock 60,000 4’s Loan 20,000 | Debtors 30,000 Mrs. 4’s Loan 16,000} Less : Provision _2,000 28,000 Workmen Compensation Reserve | 20,000 Capitals : 4 40,000 | Furniture 20,000 B 20,000 | Goodwill 18,000 c 20,000 Cash at Bank 10,000 1,86,000 I. A agreed to take over furniture at 20% less than the book value. Il. Fixed assets realised 32,000 and stock 255,000. Il. Bad Debts amounted to 75,000. IV. Expenses of realisation were 23,000. Creditors were paid at a discount of 5%. V. There was a claim of 6,400 for damages against the firm. It had to be paid. Prepare necessary accounts. SOLUTION : 7. Dr. REALISATION ACCOUNT Cr. Particulars z Particulars z To Fixed Assets A/c 50,000 | By Creditors A/c 40,000 To Stock A/c 60,000 | By Bills Payable A/o") 10,000 To Debtors A/c 30,000 | By Mrs, 4’s Loan A/c) 16,000 To Fumiture A/c 20,000 | By Provision for Bad Debts A/c 2,000 To Goodwill A/c 18,000 | By Bank A/c To Bank A/c Fixes Assets 32,000 (Expenses of Realisation) 3,000] Stock 55,000 To Bank A/c Debtors 25,000} 1,12,000 Creditors 38,000 By 4’s Capital A/c Bills Payable 10,000 (Fumiture taken over) 16,000 Mrs. 4’s Loan 16,000 | 64,000 | By Loss on Realisation : Des 4’sCapital le 227,700 (Claim against the firm) 6,400 B’s Capital A/c t 13,850C's Capital le 13,850] 55,400 231400 Dr. ACCOUNT Cr. Particulars z Particulars z To Bank Ale By Balance bid Dr CAPITAL ACCOUNTS Cr. Particulars | A C | Particulars | A | B | C z z z | zie To Realisation By Balance b/d | 40,000| 20,000) 20,000 Alc (Fumiture By Workmen taken over Compensation by 4) 16,000) Reserve 10,000] 5,000] 5.000 To Realisation Alc (Loss) | 27,700 13,850] 13,850 | To Bank A/c Final payment) | 6,300] 11,150| 11,150 30,000) 25,000| 25,000 30,000) 25,000] 25,000 Dr. BANK ACCOUNT cr. Particulars z Particulars z To Balance b/d 10,000 | By Realisation A/c To Realisation A/c (Expenses of Realisation) 3,000 (Assets Realised) 1,12,000 | By Realisation Ale (Liabilities Paid off) 64,000 By Realisation Ale (Claims against the firm) 6,400 By 4’s Loan A/c 20,000 By A’s Capital Ale 6,300 By B's Capital Alc 11,150 By C’s Capital Ale 11,150 1,22,000 1,22,000 Notes : (1) Nothing is mentioned in the question about the payment of Bills Payable and Mrs. A’s Loan. It will be assumed that these will be paid in full. (2) Goodwill appears in the Balance Sheet. It will be treated like any other asset and is transferred to the debit of Realisation A/c. Q.8.X, Yand Z are in partnership, sharing profits and losses equally. They decided to dissolve the partnership on 31st March, 2018, at which date the Balance Sheet of the firm was as followsLiabilities Amount Assets Amount z z Capital Ales Premises 80,000 x 90,000 | Machinery 68,000 y 60,000 | Stock 40,000 Zz 40,000 | Sundry Debtors 30,000 Current A/es Bills Receivable 36,000 x 13,000 | Cash at Bank 30,000 y 4,000 | Current Ale — Z 3,000 Sundry Creditors 60,000 Advance from X 15,000 Advance from ¥ 5,000 2,87,000 The assets realised as under : Premises 20% more; Machinery 40% less; Stock %5,000 more, Sundry Debtors and Bills Receivable at book values. Expenses of realisation amounted to 72,000. Sundry Creditors agreed to accept 57,500 in full settlement. Show necessary ledger accounts to close the books of the firm. SOLUTION : 8, Dr. REALISATION ACCOUNT c Particulars z Particulars Le To Premises Ale 80,000 | By Sundry Creditors Ae 60,000 To Machinery A/c 68,000| By Bank A/e To Stock Alo 40,000| (Assets Realised) To Sundry Debtors Ale 30,000 Premises 96,000 To Bills Receivable A/c 36,000 Machinery 40,800 To Bank Alc Stock 45,000 (Expenses of Realisation) 2,000 Sundry Debtors 30,000 To Bank Ale Bills Receivable 36,000 | 2,47,800 (Creditors Paid off) 57,500 | By Loss on Realisation : XsCunent Ale + 1,900 YsCument le + 1,900 ZsCunent Ale + 1,900] 5,700 Dr. ADVANCE FROM X ACCOUNT Cr. Particulars z Particulars z To Bank Ale 15,000 | By Balance b/d 15,0005. SOLUTIONS TO PRACTICAL QUESTIONS Dr. ADVANCE FROM ¥ ACCOUNT Cr. Particulars zg Particulars z To Bank A/c 5,000 | By Balance b/d 5,000 Dr. CURRENT ACCOUNTS Cr. Particulars x ¥ Zz Particulars x Y z z zg z z zg To Balance b/d = - 3,000|By Balance b/d | 13,000] 4,000, — To Realisation By Capital A/c Alc (Loss) | 1,900} 1,900] 1,900) (Transfer) 4,900 To Capital A/c (Transfer) | 11,100) — 2,100 13,000} 4,000) 4,900 Dr. CAPITAL ACCOUNTS Cr. Particulars x Y Z Particulars x Y z z z z z z To Current Ale By Balance b/d | 90,000] 60,000 40,000 (Transfer) - - 4,900|By Current A/c | 11,100} 2,100) 9 — To Bank A/c inal Payment) | 1,01,100] 62,100) 35,100 1,01,100] 62,100} 40,000 1,01,100) 62,100} 40,000 Dr. BANK ACCOUNT Cr. Particulars zg Particulars z To Balance b/d 30,000 | By Realisation A/c To Realisation A/c (Expenses of Realisation) 2,000 (Assets Realised) 2,47,800 | By Realisation A/c (Creditors Paid off) 57,500 By Advance from X A/c 15,000 By Advance from Y A/c 5,000 By X’s Capital A/c 1,01,100 By Y’s Capital A/c 62,100 By Z's Capital A/c 35,100 2,77,800 77,80 Q. 9. The following was the Balance Sheet of X, Y and Z as at 28.2.2017 : Liabilities z Assets z Creditors 30,000 | Bank 32,000 Bills Payable 10,000 | Debtors 48,000 G’s Loan 18,000 | Stock 19,000 Y's Loan 20,000 | Furniture 43,000 Workmen Compensation Reserve} 33,000 | Land and Building 1,09,000 Capitals : Zs Capital 20,000DISSOLUTION OF A PARTNERSHIP FIRM 5.13 x 75,000 Y 85,000 | 1,60,000 2,71,000 The firm was dissolved on the above date on the following terms : (i) Debtors realized £29,000 and creditors and bills payable were paid at a discount of 10%. (ii) Stock was taken over by X for 717,000 and furniture was sold to K for 20,000. (ii) Land and Building was sold for %2,98,000. (iv) G’s loan was paid by a cheque of the same amount. (v) Compensation to workmen paid by the firm amounted to 15,000. Prepare Realisation Account, Capital Accounts and Bank Account. SOLUTION : 9. Dr. REALISATION ACCOUNT Cr Particulars z Particulars z To Debtors A/e 48,000 | By Creditors A/e 30,000 To Stock A/c 19,000 | By Bills Payable A/c 10,000 To Furniture A/c 43,000 | By G's Loan A/c 18,000 To Land & Building Ale 1,09,000 | By Workmen Compensation To Bank A/c Reserve A/c 15,000 (Liabilities Paid off) By Bank A/c (Assets Realised) Creditors 27,000 Debtors 29,000 Bills Payable 9,000 Land & Building 2,98,000 G's Loan Ale 18,000| $4,000} Furniture 20,000) 3,47,000 ‘To Bank A/e (Workmen By ¥°s Capital A/c Compensation paid off) 15,000| (Stock taken over) 17,000 To Profit on Realisation : Ls Capital Ale ; 49,667 PsCapital Ae 49,667 ZsCapital Ae + 49,666 Dr. Y'S LOAN ACCOUNT Gr. Particulars Particulars z ‘To Bank Ale By Balance b/d 20,000 20,000 Dr. CAPITAL ACCOUNTS C. Particulars | __X ¥ Z_| Particulars |X Y Zz z z z z z z To Balance b/d 20,000|By Balance b/d | 75,000] 85,000To Realisation By Workmen Ale (Stock ‘Compensation taken over) | 17,000 Reserve A/c} 6,000} 6,000} 6,000 To Bank A/c [By Realisation (Final Alc (Profit) | 49,667) 49,667] 49,666 Payment) | 1,13,667| 1,40,667| 35,666] 1,30,667| 1,40,667| 55,666) 1,30,667] 1,40,667| 55,666 Dr. BANK ACCOUNT &. Particulars z Particulars & To Balance b/d 32,000 | By Realisation A/c To Realisation A/c (Liabilities Paid off) 54,000 (Assets Realised) 3,47,000 | By Realisation A/c (Workmen Compensation Paid) 15,000 By ¥’s Loan A/c 20,000 By X’s Capital A/c 1,13,667 By Y's Capital A/c 1,40,667 By Z's Capital A/c 35,666 Q. 10 (A). Pritam and Naresh decided to dissolve their firm on September 30, 2018, ‘when their Balance Sheet stood as follows : Liabilities zg Assets zg Capital Accounts : Cash at Bank 400 Pritam 40,000 | Stock-in-Trade 21,500 Naresh 20,000 | Bills Receivable 8,800 Loan Accounts : Sundry Debtors 45,000 ‘Naresh 14,000 | Less - Provision for Mrs. Pritam 10,000 Bad Debts _1,500} 43,500 Sundry Creditors 36,000 | Furniture 3,000 Outstanding Rent 500 | Plant & Machinery 23,000 Goodwill 20,000 Prepaid Insurance The assets were realised as follows :— Stock 20,000; Bills Receivable %3,800; Furniture %5,100; Plant & Machinery %35,000; Sundry Debtors at 10% less than book value. Sundry Creditors allowed a discount of 5%. Pritam agreed to pay his wife’s loan, Naresh agreed to pay outstanding rent. Expenses on dissolution came to 800. Pritam and Naresh shared profits and losses in the ratio of their Capitals. Accounts were finally settled. Prepare Journal, Realisation Account, Capital Accounts and Bank Account.SOLUTION : 10 (A). JOURNAL ENTRIES Date Particulars LE. | Dr. ®) 2018 Sept. 30 Realisation A/c Dr. To Stock-in-Trade A/c To Bills Receivable A/c To Sundry Debtors A/c To Fumiture A/c To Plant & Machinery A/c To Goodwill A/c To Prepaid Insurance A/c (Transfer of various assets except cash to Realisation A/c, at books values) Mrs. Pritam’s Loan A/e Outstanding Rent A/c Provision for Bad Debts A/c To Realisation A/c (Outside liabilities and provision transferred to realisation A/c, at book figures) Dr. Sundry Creditors A/c Dr. Dr. Dr. Bank A/c Dr. To Realisation A/c (Amount realised on sale of Assets : Stock 20,000 Bills Receivable 3,800 Furniture 5,100 Plant & Machinery 35,000 Sundry Debtors 40,500 1,04,400) Realisation A/c Dr. To Bank A/c (Creditors paid at a discount of 5%) Realisation A/c Dr. To Pritam’s Capital A/c (Mrs, Pritam’s loan taken over by Pritam) Realisation A/c Dr. To Naresh’s Capital A/c (Liability of outstanding rent paid by Naresh) Realisation A/c Dr. To Bank A/e (Payment of expenses of realisation) Naresh’s Loan A/c Dr. To Bank A/c (Payment of Naresh’s loan) 121,600 10,000 36,000 1,500 1,04,400 34,200 10,000 500 800 14,000 21,500 8,800 45,000 3,000 23,000 20,000 300 48,000 1,04,400 34,200 10,000 500 14,000ICAL QUESTIONS Pritam’s Capital A/c (2/3) Dr. 9,800 Naresh’s Capital A/c (1/3) Dr. 4,900 To Realisation Ale 14,700 (Loss on realisation transferred to partner's Capital Accounts) Pritam’s Capital A/c Dr. 40,200 Naresh’s Capital A/c Dr. 15,600 To Bank A/c 55,800 (Final payment made to the partners) Dr. REALISATION ACCOUNT Cr Particulars z Particulars z To Stock-in-Trade A/c 21,500 | By Mrs. Pritam’s Loan A/c 10,000 To Bills Receivable A/c 8,800 | By Sundry Creditors A/c 36,000 To Sundry Debtors A/c 45,000 | By Outstanding Rent A/c 500 To Furniture A/c 3,000 | By Provision for Bad Debts A/c 1,500 To Plant & Machinery A/c 23,000 | By Bank A/c (Assets Realised) To Goodwill A/c 20,000| Stock 20,000 To Prepaid Insurance A/c 300| Bills Receivable 3,800 To Bank A/c (Creditors Paid off) | 34,200) Furniture 5,100 To Pritam’s Capital A/c Plant & Machinery 35,000 (Mrs. Pritam’s Sundry Debtors 40,500 | 1,04,400 Loan taken over) 10,000 | By Loss on Realisation : To Naresh’s Capital Ale asta taend Ric! (Outstanding Rent taken over) 500) Pritam’s Capital A/c 9,800 To Bank A/c se canitat aye (Expenses on Realisation) 200| Naresh’s Capital A/c; 4,900 14,700 1,67,100 Dr. ‘NARESH’S LOAN ACCOUNT or. Particulars z Particulars To Bank A/c 14,000 | By Balance b/d 14,000 Dr. CAPITAL ACCOUNTS Cr Particulars Pritam | Naresh Particulars Pritam | Naresh z z x z To Realisation A/c By Balance b/d 40,000} 20,000 (Loss) 9,800 4,900|By Realisation A/c To Bank A/c (Mrs, Pritam’s loan] (Final Payment) | 40,200 15,600) taken over) 10,000 By Realisation A/c (Outstanding Rent taken over) 500 20,500 50,000} 20,500bis UTION OF A PARTNERSHIP FIRM 5.17 Dr. BANK ACCOUNT Cr. Particulars z Particulars [= To Balance b/d 400 | By Realisation A/c To Realisation A/c (Creditors Paid off) 34,200 (Assets Realised) 1,04,400 | By Realisation A/c (Expenses of Realisation) 800 By Naresh’s Loan A/c 14,000 By Pritam’s Capital A/c 40,200 By Naresh’s Capital A/c 15,600 1,04,800 Q. 10 (B). Mrs. Rita Chowdhary and Miss Shobha are partners in a firm, ‘Fancy Garments Exports’ sharing profits and losses equally. On Ist April, 2018, the Balance Sheet of the firm was as follows : Liabilities z Assets z ‘Sundry Creditors 75,000 | Bank 36,000 Bills Payable 30,000 | Stock 75,000 Mr. Chowdhary’s Loan 15,000 | Book Debts 66,000 Reserve Fund 24,000 | Less: Provision for Mrs. Rita Chowdhary’s Capital 90,000 Doubtful Debts 6,000} 60,000 Miss Shobha’s Capital 30,000 | Plant & Machinery 45,000 Land & Buildings 48,000 2,64,000 The firm was dissolved on the date given above. The following transactions took place: (i) Mrs. Rita Chowdhary undertook to pay Mr. Chowdhary’s Loan and took over 50 per cent of stock at a discount of 20 per cent. (ii) Book-debts realised $54,000; balance of the stock was sold off at a profit of 30 per cent on cost. (iii) Sundry Creditors were paid out at a discount of 10 per cent. Bills payable were paid in full. (#) Plant and Machinery realised %75,000 and Land and Buildings %1,20,000. () Mrs. Rita Chowdhary took over the goodwill of the firm at a valuation of 30,000. (vi) Realisation expenses were 25,250. Show the Realisation Account, Bank Account and Partners’ Capital Accounts in the books of the firm. SOLUTION : 10 (B). Dr. REALISATION ACCOUNT Cr. Particulars z Particulars z To Stock A/c 75,000 | By Provision for Doubtful To Book Debts A/c 66,000} Debts A/c 6,000 To Plant & Machinery A/c 45,000 | By Sundry Creditors A/c 75,000SOLUTIONS TO PRACTICAL QUESTIONS 5. To Land & Buildings A/c 48,000 | By Bills Payable A/c 30,000 To Mrs. Rita Chowdhary’s By Mr. Chowdhary’s Loan A/c 15,000 Capital A/c (Mr. Chowdhary’s By Mrs. Rita Chowdhary’s loan taken over) 15,000| Capital A/c To Bank A/c (50% of stock taken over) 30,000 (Liabilities paid off) By Bank A/c (Assets Realised) Sundry Creditors 67,500 Book Debts 54,000 Bills Payable 30,000 | 97,500 Stock 48,750 To Bank A/c Plant & Machinery 75,000 (Expenses on Realisation) 5,250 Land & Buildings 1,20,000 | 2,97,750 To Profit on Realisation : By Mrs. Rita Chowdhary’s Mrs. Rita Chowdhary’s Capital A/c Capital A/c 66,000 Miss. Shobha’s Capital A/c 66,000 | 1,32,000| — (Goodwill taken over) 30,000 4 4,83,750 Dr. CAPITAL ACCOUNTS Cr. Particulars Mrs. Rita| Miss Particulars Mrs. Rita| Miss \Chowdhary| Shobha \Chowdhary, Shobha & & z z To Realisation A/c By Balance b/d 90,000! 30,000 (50% of stock By Reserve Fund A/c 12,000, 12,000 taken over) 30,000 By Realisation A/c To Realisation A/c (Mr. Chowdharys” (Goodwill taken loan taken over) 15,000) over) 30,000| By Realisation A/c To Bank A/c (Profit) 66,000| 66,000 (Final Payment) 1,23,000) 1,08,000) 1,83,000} 108,000) 1,83,000| 1,08,000 Dr. BANK ACCOUNT Cr. Particulars eT Particulars z To Balance b/d 36,000 | By Realisation A/c To Realisation A/c (Liabilities Paid off) 97,500 (Assets realised) 2,97,750 | By Realisation A/c (Expenses on realisation) 5,250 By Mrs. Rita Chowdhary’s Capital A/c 1,23,000 By Miss Shobha’s Capital A/c 1,08,000 3,33,750 3,33,750 Q. 11. The following is the Balance Sheet of A and B as at 31st March, 2014 : Liabilities z Assets z ‘Mrs. A’s Loan 15,000 | Cash 4,200 Mrs. B’s Loan 10,000 | Bank 3,400RTNERSHIP FIRM Trade Creditors 30,000 | Debtors 30,000 Bills Payable 10,000| Less : Provision 2,000| 28,000 Outstanding Expenses 5,000 | Investments 10,000 A: Capital 1,00,000 | Stock 40,000 B: Capital 80,000 | Truck 75,000 Plant and Machinery 80,000 B; Drawings 9,400 2,50,000 00 1. Half the stock was sold at 10% less than the book value and the remaining half was taken over by A at 20% more than the book value. 2. During the course of dissolution a liability under action for damages was settled at 12,000 against 710,000 included in the creditors. 3. Assets realised as follows : Plant & Machinery — %1,00,000; Truck — 1,20,000; Goodwill was sold for 25,000; Bad Debts amounted to 5,000. Half the investments were sold at book value. 4. A promised to pay off Mrs. A’s Loan and took away half the investments at 10% discount. 5. Trade Creditors and Bills Payable were due on average basis of one month after 3 1st March, but were paid immediately on 31st March, at 12% discount per annum. Prepare necessary accounts. SOLUTION : 11. Dr. REALISATION ACCOUNT Cr. Particulars z Particulars z To Debtors A/c 30,000 | By Provision for Bad Debts A/c 2,000 To Investments A/c 10,000| By Mrs. 4's Loan A/e 15,000 To Stock A/c 40,000 | By Mrs. B’s Loan A/e 10,000 To Truck Ale 75,000 | By Trade Creditors A/c 30,000 To Plant and Machinery A/c 80,000 | By Bills Payable A/c 10,000 To Bank A/c By Outstanding Expenses A/c 5,000 (Payment of Liability) 12,000 | By Bank A/c (Assets realised) To 4’s Capital A/e Stock 18,000 (Mrs, 4’s Loan taken over) 15,000] Plant & Machinery 1,00,000 To Bank A/c Truck 1,20,000 Sundry Creditors) 19,800 Goodwill 25,000 Bills Payable 9,900 Debtors 25,000 Mrs. B’s Loan 10,000, Investments 5,000 | 2,93,000 Outstanding Expenses 5,000] 44,700 | By 4’s Capital A/c To Profit on realisation : (Stock at €24,000 and 4’s Capital A/c 43,400 investments at 74,500 B's Capital A/c 43,400 taken over) 28,500 3,93,5005.20 SOLUTIONS TO PRACTICAL QUESTIONS Dr. CAPITAL ACCOUNTS o. Particulars A B Particulars A B z z z z To Drawings A/c 9,400 | By Balance b/d 1,00,000 80,000 To Realisation A/c By Realisation Ae (Assets taken over)| 28,500 (Mrs. 4’s loan To Bank A/c taken over) 15,000) (Final Payment) | 1,29,900| 1,14,000|By Realisation A/c (Profit on realisation) 43,400| 43,400 1,23,400| Dr. BANK ACCOUNT Cr. Particulars z Particulars z To Balance b/d 3,400 | By Realisation A/c To Cash Ale (Liability Paid off) 12,000 (Cash deposited into bank) 4,200 | By Realisation A/e To Realisation A/c (Liabilities Paid off) 44,700 (Assets realised) 2,93,000| By 4’s Capital A/e 1,29,900 By B’s Capital A/c 1,14,000 3,00,600 3,00,600 Hints : 1, Discount received on payment to Creditors = 20,000x 12x = #200 2. Discount received on payment to B/P = 10,000 x eS x = =%100 Q. 12. The following is the Balance Sheet of 4, B and C, as at 31st March, 2012 : Liabilities z Assets z Creditors 30,000 | Bank 15,000 Mrs, A’s Loan 20,000 | Bills Receivable 12,000 Outstanding Salary 8,000|Stock 40,000 Investment Fluctuation Fund 10,000 | Sundry Debtors 40,000 Reserves 12,000| Less : Provision for Capital Accounts : Doubtful Debts _ 4,000] 36,000 A 60,000 Land and Buildings 50,000 B 40,000 Furniture 10,000 c 20,000 | 1,20,000 ) Typewriters 7,000 Investments 30,000 700,000 00 The profit and loss sharing ratios of the partners are 3 : 2 : 1. At the above date, partners decide to dissolve the firm. The assets realised were as follows : Bills Receivable were realised at a discount of 5%. Debtors were all good; Stock realised 32,000. Land and Buildings realised at 40% higher than the book value. FurnitureDISSOLUTION OF A PARTNERSHIP FIRM 5.21 was sold for %6,000 by auction and auctioneer’s commission amounted to %300. Typewriters were taken over by 4 for an agreed valuation of 75,000. Investments were sold in the open market at a price of 225,000, for which a commission of 2% was paid to the broker. Creditors agreed to accept 10% less. All other liabilities were paid off at their book value. The firm retrenched their employees three months before the dissolution of the firm and the firm had to pay %25,000 as compensation. This liability was not appearing in the above Balance Sheet. Close the books of the firm by preparing Realisation Account, Partner's Capital Accounts, and Bank Account. SOLUTION : 12. Dr. REALISATION ACCOUNT cr. Particulars z Particulars z To Bills Receivable A/c 12,000 | By Provision for Bad Debts A/c 4,000 To Stock A/c 40,000 | By Creditors A/c 30,000 To Sundry Debtors A/c 40,000 | By Mrs. A’s Loan A/c 20,000. To Land and Buildings A/c 50,000 | By Outstanding Salary A/c 8,000 To Furniture A/c 10,000 | By Investment Fluctuation To Typewriters A/c 7,000 Fund A/c 10,000 To Investments A/c 30,000 | By Bank A/c (Assets realised) To Bank A/c (Liabilities Paid) : Bills Receivable 11,400 Creditors 27,000 S. Debtors 40,000 Mrs. 4’s Loan 20,000 Stock 32,000 Outstanding Salary 8,000 Land & Buildings 70,000 Compensation 25,000} — 80,000 Fumiture (6,000 — 300) 5,700 Investments (25,000 less 2%) 24,500 | 1,83,600 By 4’s Capital A/c (Typewriters taken over) 5,000 By Loss on realisation : A’sCapitl le 2 4200 B'sCapital Ae 2 2,800 C’s Capital Ale 4 1,400} 8,400 2,69,000 Dr. CAPITAL ACCOUNTS Cr. Particulars | A B C__| Particulars | A B Cc z z z z z z To Realisation By Balance b/d | 60,000} 40,000} 20,000 ‘Ale (Type- [By Reserves 6,000} 4,000] 2,000 writers taken} over) 5,000)Bs amnercmmamconmenor® SOLUTIONS TQ PRACTICAL QUESTIONS To Realisation Alc (Loss) | 4,200} 2,800} 1,400 To Bank A/c (Final Payment) | 56,800] 41,200] 20,600 66,000] 44,000) 22,000, Dr. BANK ACCOUNT Cr. Particulars z Particulars z To Balance b/d 15,000 | By Realisation A/c To Realisation A/c (Liabilities paid) 80,000 (Assets realised) 1,83,600 | By 4’s Capital A/c 56,800 By B’s Capital A/c 41,200 By C’s Capital A/c 20,600 1,98,600 1,98,600 Q. 13. Following is the Balance Sheet of Ramji Lal and Panna Lal as at 31st March, 2016: Liabilities z Assets z Capitals : Goodwill 4,000 Ramji Lal Machinery 6,000 Panna Lal Plant 12,800 Reserves Debtors 10,800 Workmen Compensation Reserve Less : Provision 800} 10,000 Creditors Bank 6,800 Bills Payable 39,600 They decided to dissolve the firm. Assets are realised as follows : (i) Machinery 10% less than book value; Plant 12,500 and Goodwill 2,520. (ii) Ramji Lal is to take over Debtors amounting to %6,800 at 6,000, remaining Debtors were realised for 90% of the book value. (iii) One bill for 7600 under discount having been dishonoured had to be taken up by them, (iv) The Bill payable of %2,600 to be assumed by Panna Lal at that figure (¥) Creditors are paid off at a discount of 10%. (vi) An amount of %2,500 had to be paid for Workmen Compensation. (vii) The liquidation expenses amounted to 400. You are required to show the Realisation Account, Capital Accounts and Bank Account. SOLUTION : 13. Dr. REALISATION ACCOUNT Cr. Particulars z Particulars z To Goodwill A/c 4,000 | By Provision for Bad Debts A/c 800DISSOLUTION OF A PARTNERSHIP FIRM To Machinery A/c 6,000 | By Workmen Compensation To Plant A/c 12,800} Reserve 2,000 To Debtors A/c 10,800 | By Creditors A/c 5,400 To Bank A/c By Bills Payable A/c 2,600 (Bill dishonoured) 600 | By Bank A/c To Panna Lal’s Capital A/e (Assets realised) (Bills Payable taken over) 2,600 Machinery 5,400 To Bank A/c (Creditors Paid) 4,860 Plant 12,500 To Bank A/c (Workmen Goodwill 2,520 Compensation Paid) 2,500 Debtors 3,600} 24,020 To Bank A/c By Ramji Lal’s Capital A/c (Expenses of realisation) 400] — (Debtors taken over) 6,000 By Loss on realisation ; Ramji Lal’s Capital A/c 1 3 1,870 Panna Lal’s Capital A/c 1 : 1,870! 3,740 44,560 44,560 Dr. CAPITAL ACCOUNTS Cr. Particulars Ramiji Lal | Panna Lal Particulars Ramji Lal | Panna Lal z z z z To Realisation A/c By Balance b/d 16,000} — 10,000 @ebtors taken By Reserves 1,800 1,800 over) 6,000 By Realisation A/c To Realisation A/c (Bills Payable (Loss) 1,870) 1,870| taken over) 2,600 To Bank A/c (Final Payment) 12,530 14,400| 17,800} 14,400 Dr. BANK ACCOUNT Cr. Particulars z Particulars zg To Balance b/d 6,800 | By Realisation A/c To Realisation A/c (Bills dishonoured) 600 (Assets realised) 24,020] By Realisation A/c (Creditors paid) 4,860 By Realisation A/c (Workmen Compensation) 2,500 By Realisation A/c (Expenses of realisation) By Ramji Lal’s Capital A/c By Panna Lal’s Capital A/c5.24 SOLUTIONS TO PRACTICAL QUESTIONS Q. 14, Raman and Richa were partners in a firm sharing profits in the ratio of 7 : 3. On 31.3.2018 the Balance Sheet of the firm was as follows : BALANCE SHEET OF RAMAN AND RICHA as at 31.3.2018 Liabilities z Assets z Capitals : Land and Building 7,50,000 Raman 7,00,000 Fumiture 1,20,000 Richa 3,00,000 | 10,00,000| Debtors 1,32,000 ‘Sundry Creditors 1,75,000 | Stock 1,03,000 Cash 70,000 11,75,000 100 The firm was dissolved on 1.4.2018 and the assets and liabilities were settled as follows : (i) Land and building was taken over by Raman at a depreciation of 10% for cash; (ii) Creditors of %1,25,000 took over stock and debtors in full settlement of their claim; (iii) Remaining creditors were paid by Richa; (iv) Fumiture realised 75,000 less than the book value. (0) Expenses of realisation were 400. Pass necessary journal entries for dissolution of the firm. SOLUTION : 14. JOURNAL Date Particulars LF.| Dr.@) | Cr. @) 2018 April 1 | Realisation Ale Dr. 11,05,000 To Land and Building A/c 7,50,000 To Furniture A/c 1,20,000 To Debtors A/c 1,32,000 To Stock A/e 1,03,000 (Assets transferred to Realisation A/c on dissolution) April 1 | Sundry Creditors A/c Dr. 1,75,000 To Realisation A/e 1,75,000 (Liabilities transferred to Realisation A/c on dissolution) April 1 [Cash A/e Dr. 6,75,000 To Realisation A/c 6,75,000 (Land and building taken over by Raman for cash) April 1 Realisation A/c Dr. 50,000 To Richa’s Capital Ale 50,000 (Remaining creditors paid by Richa) April 1 | Cash A/c Dr. 1,15,000 To Realisation A/c 1,15,000 (Furniture realised)Realisation A Ale Dr. 4) To Cash A/c 400 (Expenses of realisation paid) April | | Raman’s Capital A/c Dr. 1,33,280 Richa’s Capital A/c Dr. 57,120 To Realisation A/c 1,90,400 (Loss on realisation transferred to partners’ capital accounts in their profit sharing ratio of 7 : 3) April 1 | Raman’s Capital A/c Dr. 5,66,720 Richa’s Capital A/c Dr. 292,880. To Cash A/c 8,59,600 (Final payment made to partners on dissolution) Working Notes : (1) No entry is to be Passed for creditors of 1,25,000 taking over stock and debtors in full settlement of their claim, @) Calculation of profit /Ioss on realisation Dr. REALISATION ACCOUNT Cr. Particulars z Particulars z To Land & Building 7,50,000| By Sundry Creditors 1,75,000 To Fumiture 1,20,000| By Cash (Land & Building) 6,75,000 To Debtors 1,32,000| By Cash (Furniture) 1,15,000 To Stock 1,03,000 | By Loss on Realisation To Richa’s Capital A/c transferred to (Creditors) 50,000} Raman’s Capital A/c 1,33,280 To Cash (Expenses of realisation) 400) Richa’s Capital A/c 57,120 | 1,90,400 (3) Calculation of final payment made to the partners on dissolution : Dr. PARTNERS’ CAPITAL ACCOUNTS Cr. Particulars Raman Richa Particulars Raman Richa z z z z To Realisation A/c By Balance b/d 7,00,000) 3,00,000 (Loss) 1,33,280 57,120 | By Realisation A/c To Cash (Creditors) _ 50,000 (Final settlement) | 5,66,720] 2,92,880 7,00,000} 3, 3,50,000 Q. 15. Verma and Sharma were partners in a firm sharing profits in the ratio of 3 : 1. On 31.3.2018 their Balance Sheet was as follows : BALANCE SHEET OF VERMA AND SHARMA as at 31.3.2018 Liabilities z ‘Assets # - itals : and Building r Capitals : Land a Verma 1,20,000 Machinery 60,000Sharma 80,000 | 2,00,000 | Debtors 80,000 Creditors 70,000 | Bank 60,000 2,70,000 The firm was dissolved on 1.4.2018 and the assets and liabilities were settled as follows : (i) Creditors of %50,000 took over Land and Building in full settlement of their claim; (ii) Remaining creditors were paid in cash, (iii) Machinery was sold at a depreciation of 30%; (iv) Debtors were collected at a cost of 7500; (v) Expenses of realisation were €1,700. Pass necessary journal entries for dissolution of the firm. SOLUTION : 15. In the Books of the Firm JOURNAL Date Particulars LF. | Dr. @) | Cr. @) 2018 April | |Realisation A/c Dr. 2,10,000 To Land and Building 70,000 To Machinery 60,000 To Debtors 80,000 (Assets transferred to Realisation Account on dissolution) ‘Creditors A/c Dr. 70,000 To Realisation A/c 70,000 (Creditors transferred to Realisation Account on dissolution) Bank A/c Dr. 1,21,500 To Realisation A/c 1,21,500 (Assets realized : machinery at 42,000 and debtors at 279,500) Realisation A/c Dr. 20,000: To Bank A/c 20,000 (Remaining creditors paid off) Realisation A/c Dr. 1,700 To Bank A/c 1,700 (Payment of realisation expenses) Verma’s Capital A/c Dr. 30,150) Sharma’s Capital A/c Dr. 10,050 To Realisation A/c 40,200 (Loss on realisation transferred to partners’ capital accounts in 3 : 1) (Note 2) Verma’s Capital A/c Dr. 89,850) /Sharma’s Capital A/c Dr. 69,950. To Bank A/c 1,59,800 (Final payment made to partners (Note 3)Working Notes : (1) No entry is to be passed for Creditors of $50,000 taking over Land and Building in full settlement of their claim. (2) Calculation of Profit or Loss on Realisation : Dr. REALISATION ACCOUNT Cr. Particulars z Particulars z To Land & Building 70,000 | By Creditors 70,000 To Machinery 60,000 | By Bank A/c (Assets realised) To Debtors 80,000| (42,000 + 779,500) 1,21,500 To Bank A/c (Creditors paid) By Loss transferred to : (70,000 — 50,000) 20,000| — Verma’s Capital A/e 30,150 To Bank A/c (Exp.) 1,700) Sharma's Capital A/e 10,050 1,700 (3) Calculation of final payment made to partners on dissolution : Dr. PARTNERS’ CAPITAL ACCOUNTS Cr. Particulars Verma | Sharma Particulars Verma Sharma z z z z To Realisation A/c By Balance b/d 1,20,000 80,000 (Loss) 30,150 10,050 To Bank A/c (Bal. Fig.) (Final Payment) 89,850| 69,950 1,20,000| 80,000 Q. 16, Mala, Necla and Kala were partners sharing profits in the ratio of 3: 2: 1. On 1-3-2015 their firm was dissolved. The assets were realized and liabilities were paid off. The accountant prepared Realisation Account, Partner’s Capital Accounts and Cash Account, but forgot to post few amounts in these accounts. You are required to complete these below given accounts by posting correct amounts. Dr. REALISATION ACCOUNT Cr Particulars z Particulars z To Sundry Assets : By Provision for bad debts 1,000 Machinery 10,000 By Sundry Creditors 15,000 Stock 21,000 By Sheela’s Loan 13,000 Debtors 20,000 By Repairs and Renewals Reserve| 1,200 Prepaid Insurance 400 By Cash — Assets sold : Investments 3,000} 54,400] Machinery 8,000 To Mala’s Capital A/c Stock 14,000 —Sheela’s Loan 13,000] Debtors 16,000} 38,000 To Cash— Creditors paid 15,000 | By Mala’s Capital — Investments | 2,000 To Cash—Dishonoured bill paid | 5,000 . senee To Cash — Expenses 800 88,200 88,200Dr. CAPITAL ACCOUNTS Cr Particulars _| Mala | Neela | Kala | Particulars | Mala | Neela | Kala z z z z z z ToCash | 12,000] 9,000) By Cash 1,000 23,000] 15,000 Dr. CASH ACCOUNT Cr Particulars Amount Particulars Amount z z To Balance b/d 2,800 | By Realisation A/c To Realisation A/c — Creditors paid — Sale of Assets 38,000 | By Dishonoured bill To Kala’s Capital A/e By Mala’s Capital A/c By Neela’s Capital A/c a8 (CB... 2015, All India) SOLUTION : 16. Dr. REALISATION ACCOUNT Cr. Particulars Amount Particulars Amount z z To Sundry Assets : By Provision for Bad Debts 1,000 Machinery 10,000 By Sundry Creditors 15,000 Stock 21,000 By Sheela’s Loan 13,000 Debtors 20,000 By Repairs and Renewals Reserve| 1,200 Prepaid Insurance 400 By Cash — Assets sold : Investments 3,000} 54,400| Machinery 8,000 To Mala’s Capital A/c Stock 14,000 — Sheela’s Loan 13,000] Debtors 16,000 38,000 To Cash — Creditors paid 15,000 | By Mala’s Capital — Investments | 2,000 To Cash —Dishonoured bill paid | 5,000 | By Loss (Balancing Fig.) To Cash — Expenses 800] — transferred to : Mala’s Capital A/e 9,000 Neela’s Capital A/c 6,000 Kala’s Capital Alo _ 3,000 18,000 88,200 20 Dr. PARTNER’S CAPITAL ACCOUNTS Cr. Particulars | Mala | Neela | Kala | Particulars | Mala | Neela | Kala z z z z z z To Realisation By Balance b/d } 10,000} 15,000 2,000 Ale 9,000] 6,000] 3,000|By RealisationDISSOLUTION OF A PARTNERSHIP FIRM 5.29 To Realisation Ale Ale Sheela’s Loan} 13,000, - (Investments) | 2,000) - — |By Cash A/c ae —| 1,000 To Cash A/c 12,000) 9,000 me 23,000) 15,000) 3,000} Dr. CASH ACCOUNT Cr. Particulars Amount Particulars Amount z z To Balance b/d 2,800 | By Realisation A/c To Realisation A/c (Creditors paid) 15,000 (Sale of Assets) 38,000 | By Realisation A/c To Kala’s Capital A/c 1,000] — (Dishonoured Bill) 5,000 By Realisation A/c (Expenses) 800 By Mala’s Capital A/c 12,000 By Neela’s Capital A/c 41,800 Balance Sheet on the Date of Dissolution not Given Q. 17. 4, B and C are in partnership sharing in 4 : 3 : 3. They decided to dissolve the partnership firm. At the date of dissolution their creditors amounted to 216,800 and in the course of dissolution a contingent liability of €3,500 not brought into the accounts matured and had to be met. Their capitals stood at €12,000, 10,000 and %8,000 respectively. B had lent to the firm in addition to Capital 713,200. The assets realised 745,670. Prepare the Realisation Account and partners’ Capital Accounts. Also show the Bank Account. SOLUTION : 17. BALANCE SHEET Liabilities z Assets z Creditors 16,800 | Sundry Assets B’s Loan 13,200] (Balancing figure) 60,000 Capital Accounts : A 12,000 B 10,000 é 8,000 Dr. REALISATION ACCOUNT Cr. Particulars z Particulars z To Sundry Assets A/c 60,000 | By Creditors A/c 16,800 To Bank A/c (Payment of By Bank A/c (Assets realised) 45,670 Contingent Liability) 3,500 | By Loss on realisation : To Bank A/c A’s Capital Ale 7,1325.30 SOLUTIONS TO PRACTICAL QUESTIONS (Creditors paid) 16,800| B's Capital A/c 5,349 C’s Capital Ae 5349 | 17,830 80,300 80,300 Dr. B’S LOAN ACCOUNT Cr Particulars z Particulars z To Bank A/c 13,200 | By Balance b/d 13,200 Dr. CAPITAL ACCOUNTS Cr. Particulars 4 [28 fc Particulars 4 [Bic 7 [ele e|zf[e To Realisation A/c [By Balance b/d | 12,000| 10,000 8,000 (Loss) 7.132] 5,349| 5,349] To Bank Ale (Final Payment) | 4,868 12,000 8,000 Dr. ACCOUNT Cr. Particulars Particulars z To Realisation A/e By Realisation A/c (Payment of (Assets realised) 45,670| Contingent Liability) 3,500 By Realisation A/c (Creditors paid) 16,800 By B’s Loan A/c 13,200 By 4’s Capital A/c 4,868 By B’s Capital Alc 4,651 By C’s Capital Ale 2,651 Q. 18. A and B who were in partnership sharing profits and losses in the proportion of 4/7 and 3/7 respectively, decided to dissolve the firm as on 31st March, 2018. At the time of dissolution A’s capital was 21,25,030, B’s 2,070; the creditors amounted to %23,150 and cash 4,520. Remaining assets realised %1,24,910 and expenses of dissolution were 21,860. 4 & B both were solvent, Prepare the Balance Sheet as on the date of dissolution and the accounts necessary to close the books of the firm. Show the final adjustments of cash between partners. SOLUTION : 18. BALANCE SHEET Liabilities z Assets z Creditors 23,150 | Cash 4520 Capital Alcs : Sundry Assets 4 1,25,030 (Balancing Figure) 1,45,730 B 2,070 | 1,27,100 1,50,250DISSOLUTION OF A PARTNERSHIP FIRM BS Dr. REALISATION ACCOUNT Go Particulars z Particulars z To Sundry Assets Alc 1,45,730 | By Creditors Ae 23,150 To Cash A/c (Creditors Paid off) | 23,150 | By Cash A/c (Assets Realised) | 1,24,910 To Cash Ale By Loss on realisation : (Expenses of realisation) 1,860) 4°s Capital Alo 4 12,960 B's Capital Ae 3 9,720/ 22,680 1,70,740 1,70,740 Dr. CAPITAL ACCOUNTS O. Particulars A B Particulars A B z z z z To Realisation Ale By Balance bid 125,030 2,070 (Loss) 12,960) 9,720|By Cash A/c To Cash Ale (Amount brought in) 7,650 Final Payment) | 1,12,070 125,030] 5,720 725030] 9.700 Dr. CASH ACCOUNT Cr. Particulars ' Particulars z To Balance b/d 4,520 | By Realisation A/c To Realisation Ale (Creditors Paid off) 23,150 (Assets realised) 1,24,910 | By Realisation Ave To B's Capital A/c 7,650| (Expenses of realisation) 1,860 By A’s Capital A/e 112,070 1,37,080 Q. 19. Ashok and Kishore were in partnership sharing profits in the ratio of 3 : 1. They agreed to dissolve the firm. The assets (other than cash of %2,000) of the firm realised %1,10,000. The liabilities and other particulars of the firm on that date were as follows : z Creditors 40,000 Ashok’s Capital 1,00,000 Kishore’s Capital 10,000 (Dr. balance) Profit & Loss Account 8,000 (Dr. balance) Realisation Expenses were 1,000 Creditors were settled in full settlement at 38,000. Prepare realisation and cash account. SOLUTION : 19. BALANCE SHEET Liabilities z Assets z Creditors 40,000 | Cash 2,000 Ashok’s Capital 1,00,000 | Profit & Loss A/e 8,000 Kishore’s Capital (Dr.) 10,000IONS TO PRACTICAL QUESTIONS 5.32 Sundry Assets (Balancing Figure) | 1,20,000 140,000 Dr. REALISATION ACCOUNT or. Particulars = Particulars g To Sundry Assets Ale 1,20,000 | By Creditors Ale 40,000 To Cash Ae By Cash A/c (Assets realised) | 1,10,000 (Creditors Paid off) 38,000 | By Loss on realisation: To Cash Ale ne conta ape (Expenses of realisation) 1,000| ‘Astok’s Capital Ale 6,750 Kishore's Capital Ae + 2.250} 9,000 1,59,000 Dr. CAPITAL ACCOUNTS Cr Particulars ‘Ashok | Kishore | __ Particulars ‘Ashok | Kishore z z z z To Balance bid 10,000|By Balance b/d 1,00,000 To Profit & Loss A/c | 6,000] 2,000/By Cash A/e To Realisation Ae (Amount (Loss) 6,750| 2,250] brought in) 14,250 ‘To Cash Ale (Final Payment) | 87,250 14,250 7,00,000| 14,250 Dr CASH ACCOUNT or Particulars z Particulars z To Balance b/d 2,000 | By Realisation A/c To Realisation Ae (Creditors Paid off) 38,000 (Assets realised) 1,10,000 | By Realisation A/c To Kishore's Capital A/c 14,250| Expenses of realisation) 1,000 By Ashok’s Capital A/c 87,250 1726250 Q. 20. X and ¥ were partners in a firm sharing profits and losses in the ratio of 5: 3. ‘They agreed to dissolve the firm on June 30, 2018. On that date, the Capitals of X and Y were 780,000 and %40,000 respectively; the amount owed by X to the firm was 732,000 and the amount owed by the firm to ¥ was %25,000; the creditors amounted to 237,000 and balance at bank %10,000. The assets other than the amount owing by X to the firm realised 746,000. Realisation expenses amounted to £2,000. Prepare the Balance Sheet of the firm as on June 30, 2018 and necessary ledger accounts to close the books of the firm. SOLUTION : 20. BALANCE SHEET (as at June 30, 2018) Liabilities z Assets z Creditors 37,000 | Bank A/c 10,000 Ys Loan 25,000 | Xs Loan A/c 32,000DISSOLUTION OF APARTNERSHIP FIRM casncencnsncnreencod is Capital A/es Sundry Assets x 80,000 (Balancing Figure) 1,40,000 ¥Y 40,000 | 1,20,000 1,82,000. 1,82,000 Dr. REALISATION ACCOUNT Cr. Particulars z Particulars z To Sundry Assets A/c 1,40,000 | By Creditors A/c 37,000 To Bank A/c By Bank A/c (Assets realised) 46,000 (Expenses of realisation) 2,000 | By Loss on realisation : To Bank A/c (Creditors Paid off) 37,000 X's Capital Nex 60,000 Y's Capital Ale ; 36,000} 96,000 1,79,000 1,79,000 Dr. YS LOAN ACCOUNT Cr. Particulars z Particulars z To Bank A/c 25,000 | By Balance b/d Dr. CAPITAL ACCOUNTS Particulars x ¥ Particulars x Yy z z z z To X’s Loan A/c 32,000 By Balance b/d 80,000| 40,000 To Realisation A/c By Bank A/c (Loss) 60,000} 36,000] (Amount brought To Bank A/c in) 12,000) (Final Payment) 4,000 40,000) 92,000} 40,000 Dr. BANK ACCOUNT Cr. Particulars zg Particulars zg To Balance b/d 10,000 | By Realisation A/c To Realisation A/c (Expenses of realisation) 2,000 (Assets realised) 46,000 | By Realisation A/o To X’s Capital A/c 12,000| — (Creditors Paid off) 37,000 By ¥’s Loan A/c 25,000 By Y's Capital A/o 4,000 0 Q. 21. On Ist April, 2017, 4, B and C commenced business in partnership sharing profit and losses in proportion of 1/2, 1/3 and 1/6 respectively. They paid into their Bank Alc as their capital $22,000 being 10,000 by A, %7,000 by B and 75,000 by C. During the year they drew %5,000, being 21,900 by 4, 21,700 by B and @1,400 by C.SOLUTIONS TO PRACTICAL QUESTIONS On 31st March, 2018, they dissolved their firm. 4 taking up stock at an agreed valuation of 5,000, B taking up furniture at 22,000 and C taking up debtors at 3,000. After paying up their creditors, there remained a balance of 21,000 at Bank. Prepare the necessary accounts showing the distribution of the cash at the Bank and of the further cash brought in by any partner as the case required. SOLUTION : 21. BALANCE SHEET (as at 31st March, 2018) Liabilities z “Assets z A°s Capital : Sundry Assets Opening 10,000 (Balancing Figure) 17,000 Less Drawings 1.900} 8,100 B's Capital: Opening 7,000 Less: Drawings 1,700! 5,300 C's Capital Opening 5,000 Less: Drawings 1,400 17,000 Dr REALISATION ACCOUNT cr. Particulars z Particulars z To Sundry Assets Ale 17,000 | By 4's Capital Ale (Stock taken over) 5,000 By B’s Capital A/c (Fumiture taken over) 2,000 By C’s Capital A/c (Debtors taken over) 3,000 By Bank A/c) (Net assets realised) 1,000 By Loss on realisation : 4’s Capital aed 3,000 B’s Capital lez 2,000 C’s Capital Ae : 1,000 Dr. CAPITAL ACCOUNTS Cr. Particulars |_A C | Particulars | A | B | C z z z z z z ‘To Realisation By Balance b/d | 8,100| 5,300] 3,600 ‘Ae (Assets By Bank Ale taken) 5,000/ 2,000] 3,000] (Amount To Realisation brought in) 400 ‘Ne (Loss) | 3,000/ 2,000} 1,000]DISSOLU eee 5,36 To Bank A/c (Final Payment) —__ 100] 5300) 4.000 Dr. BANK ACCOUNT Cr. Particulars z Particulars z To Realisation A/c By A’s Capital A/c 100 (Net assets realised) 1,000 | By B’s Capital A/c 1,300 To C’s Capital A/c 400 : 1,400 1,400 Note : (1) Creditors must have been paid off out of the cash realised on sale of assets. Hence, 71,000 is the net amount realised on the sale of assets. Entry will be : Bank A/c Dr. 1,000 To Realisation A/c 1,000 Q. 22..X, Y and Z entered into partnership on Ist October, 2017 sharing profits and losses in the proportions of 4 : 3 : 2, respectively, and with capitals of $30,000, %20,000 and 10,000. Their assets and liabilities on Ist October, 2018, the date on which they decided to wind up their affairs, were as follows : Office Fixtures 1,000; Debtors 228,000; Bills Receivable %5,000; and Stock-in-trade 245,000. Sundry creditors were 30,000; Bills Payable %4,000. X agreed to take over the Stock-in-trade at a discount of 10% and pay off the Bills Payable Y agreed to take over the Book Debts at a discount of 20% and pay off the Creditors. Z took over the Bills Receivable at %4,877 and Office Fixtures at a depreciation of 10%. 5% p.a. interest is to be credited to each partner on his capital. Prepare Realisation A/c and Capital A/es of the partners and an account showing adjustment of profits or losses in the business. SOLUTION : 22. BALANCE SHEET (as at Ist October, 2018) Liabilities zg Assets z Sundry Creditors 30,000 | Office Fixtures 1,000 Bills Payable 4,000 | Debtors 28,000 Capitals Bills Receivable 5,000 Xx 30,000 Stock-in-trade 45,000 ¥ 20,000 Profit & Loss (Balancing Figure Zz 10,000 is assumed as loss) Note : Interest on Capital is allowed only in case of profits. In this question, there is loss of 715,000, as such, interest on Capital will not be allowed.IS TO PRACTICAL QUESTIONS 5.36 Dr. REALISATION ACCOUNT Cr Particulars z Particulars z To Office Fixtures Ale 1,000 | By Sundry Creditors A/c 30,000 To Debtors Alc 28,000 | By Bills Payable A/c 4,000 To Bills Receivable A/c 5,000 | By X°s Capital A/c To Stock-in-trade A/c 45,000 (Stock-in-trade taken over) 40,500 To¥'s Capital A/c By ¥’s Capital Ac Gills Payable taken over) 4,000| (Book debts taken over) 22,400 To F's Capital A/c By Z's Capital Ale (Creditors taken over) 30,000| (Bills Receivable at 4,877 and Office Fixtures at 900 taken over) 5,77 By Loss on realisation Xs Capital Ale : 4,588 PsCapital Ae 3,441 XsCopitlle2 —-2.294| 10,323 213,000 1,13,000 Dr. CAPITAL ACCOUNTS Cr. Particulars | X | Y | 2 | Particulars | X Y | 2 z z z t z z To Profit & By Balance b/d | 30,000] 20,000] 10,000 Loss Ale | 6,667| 5,000] _3,333|By Realisation To Realisation Ne ‘Ale (Assets (Liabilities taken over) | 40,500] 22,400] 5,777] taken over) | 4,000} 30,000 — To Realisation By Bank A/e Ale(Loss) | 4,588} 3,441] 2,294 (Amount To Bank A/c brought in) | 17,755] — | 1,404 Final Payment) 51,735 11,404 Dr. BANK ACCOUNT o. Particulars zg Particulars z To X's Capital Ale 17,155 | By ¥°s Capital Ale 19,159 To Z's Capital Ale 1,404 19,159 19,159 Q. 23. P, O and R started business on 1st April, 2017. They shared profit and loss in the ratio of 2:2: 1. Capitals contributed by them were P 240,000; Q %30,000 and R €20,000. The partners were entitled to interest on capital @ 6% p.a.| During the year the firm earned a profit (before interest) of $25,000. The partners had withdrawn P 10,000; 78,000 and R %5,000. On 31st March, 2018 the firm was dissolved. The assets realised %1,00,000. The Creditors of 715,000 were paid at a discount of 3%. Expenses incurred on realisation were 31,450. Prepare Partners’ Capital Accounts, Realisation Account, Cash Account, Profit and Loss Appropriation Account and Balance Sheet to close the books of the firm, SOLUTION : 23. PROFIT & LOSS APPROPRIATION ACCOUNT Dr. (as at 31st March, 2018) Cr. Particulars ¥ Particulars z To Interest on Capitals : By Balance b/d P 2,400 (Profit for the year) 25,000 Q 1,800 R 1,200 5,400 To Profit transferred to : P's Capital A/c 2 7840 Q'sCapital Ale 7,840 R’s Capital ey 3,920} 19,600 3 i BALANCE SHEET (as at 31st March, 2018) Liabilities z Assets z Creditors 15,000 | Sundry Assets P's Capital : 40,000 (Balancing Figure) 1,07,000 Add ; Interest on Capital 2,400 Add : Net Profit 7,840 Less : Drawings 10,000} 40,240 Q’s Capital : 30,000 Add : Interest on Capital 1,800 Add : Net Profit 7,840 Less : Drawings 8,000} 31,640 R's Capital : 20,000 Add : Interest on Capital 1,200 Add : Net Profit 3,920 Less : Drawings 5,000} 20,120Dr REALISATION ACCOUNT O. Particulars = | Particulars z To Sundry Assets Ale 1,07,000| By Creditors Alc 15,000 To Cash A/c (Creditors paid) 14,550| By Cash A/c (Assets realised) | 1,00,000 To Cash A/c By Loss transferred to : (Expenses of realisation) 1450| pss capital At 2 3200 Q's Capital Ale z 3,200 R's Capital Ae? 1,600) 8,000 723,000 123,000 Dr CAPITAL ACCOUNTS Ge. Particulars | P | Q | R | Particulars | P | Q | R z z z z z z To Realisation By Balance b/d | 40,240| 31,640| 20,120 Ale(Loss) | 3,200] 3,200] 1,600! To Cash Ale inal Payment) | 37,040] 28,440| 18,520 30,120 Dr. CASH ACCOUNT Cr. Particulars z Particulars z To Realisation Alc By Realisation Ale (Assets realised) 1,00,000| (Creditors paid) 14,550 By Realisation A/c (Expenses on realisation) 1,450 By P's Capital Ale 37,040 By 0's Capital Ae 28,440 By R's Capital Ale 18,520 7,00,000 Q. 24. A, B and C were partners from 1st April, 2016 with capitals of %3,00,000; %2,00,000 and %1,50,000 respectively. They shared profits in the ratio of 2 : 2 : 1. They carried on business for two years. In the first year ending on 31st March, 2017, they made a profit of %2,00,000 but in the second year ending on 31st Mach, 2018, a loss of % 60,000 was incurred. As the business was no longer profitable they dissolved the firm on 31st March, 2018. Creditors on that date were %75,000. The partners withdrew for personal use %40,000 per partner per year. The assets realised %4,00,000. The expenses of realisation were %5,000. Prepare Realisation Account and show your workings clearly.SOLUTION : 24, Dr. CAPITAL ACCOUNTS Cr. Date | Parti-| A B C | Date | Parti | 4 B c culars eulars 2017 z z = | 2016 z z z March |To Dra- April 1 [By 31 | wings | 40,000] 40,000) 40,000! Bank March |To Bal Ale | 3,00,000| 2,00,000| 1,50,000 31 | cfd | 3,40,000) 2,40,000] 1,50,000 2017 March [By 31 | P&L Appro- lpriation Ale 80,000} 40,000 3,80,000) 2,80,000} 1,90,000 2,80,000) 2018 2017 March {To Dra- April 1 [By Bal, 31 wings | 40,000) 40,000] 40,000] b/d | 3,40,000| 2,40,000! 1,50,000 March {To 31 | P&L Appro- lpriation Ale | 24,000 24,000] 12,000) March |To Bal. 31 | eld —|2,76,000| 1,76,000] 98,0001 3,40,000| Following Balance Sheet will be prepared on 31st March, 2018 in order to find out the missing figure of Sundry Assets on the date of dissolution : BALANCE SHEET Liabilities Amount Assets Amount z z Creditors 75,000 | Sundry Assets (Balancing Figure) | 6,25,000 Capital Ales : A 276,000 B 1,76,000 c 6,25,000 Dr. REALISATION ACCOUNT Cr. Particulars z Particulars z To Sundry Assets 6,25,000 | By Creditors A/c 75,000 To Bank A/c By Bank A/c (Assets realised) 4,00,000 (Creditors paid) 75,000 | By Loss transferred to :