ASSIGNMENT- DISSOLUTION OF PARTNERSHIP FIRM
1. A & B are partners sharing profits in 3:2. On 31.03.2020, their Balance Sheet was as follows:
Liabilities Amount(Rs.) Assets Amount(Rs.)
Creditors 70,000 Investments 60,000
Mrs. A’s loan 50,000 Furniture 50,000
Capitals: Machinery 1,50,000
A- Rs. 2,00,000 Bank 70,000
B- Rs. 1,00,000 3,00,000 Debtors 1,00,000
(-) Provision 10,000 90,000
4,20,000 4,20,000
The firm was dissolved and assets realized and liabilities were settled as follows:
(a) Debtors realized Rs. 95,000/- and Machinery was sold for Rs. 1,30,000/-.
(b) Half of the creditors accepted furniture and cash of Rs. 10,000/- in full settlement. The
remaining creditors were paid at 10% discount.
(c) An unrecorded asset of Rs. 7,000/- was handed over to an unrecorded liability of Rs. 6,000/-
in full settlement.
(d) A took over investments of the book value of Rs. 36,000/- at 20% less. A also agreed to pay
his wife’s loan. Remaining investments were sold at a profit of Rs. 5,000/-.
(e) A liability in respect of compensation to workers Rs. 10,000 occurred and paid. Realization
expenses of Rs. 5,000/- were paid by B on behalf of the firm.
Prepare necessary accounts to close the books of the firm.
2. X & Y are partners sharing profits in 3:2. On 31.03. 2020, their Balance Sheet was as follows:
Liabilities Amount(Rs.) Assets Amount(Rs.)
Creditors 90,000 Stock 50,000
Bank loan 40,000 Land & Building 1,80,000
Workmen comp. fund 10,000 Plant & Machinery 40,000
General Reserve 30,000 Debtors Rs. 50,000
Capitals: (-) provision Rs. 5,000 45,000
X- Rs. 70,000 Bank 35,000
Y- Rs. 1,20,000 1,90,000 X’s loan 10,000
3,60,000 3,60,000
The firm was dissolved and assets realized and liabilities were settled as follows:
(a) Land & Building was sold for Rs. 1,50,000/- and Plant & Machinery was sold for Rs. 35,000/-.
(b) 60% of the creditors were paid Rs. 5,000/- less in full settlement and remaining creditors
were paid full.
(c) Y took over some of the stock at Rs. 36,000/-(being 10% less than the book value). Balance
of the stock realized 40%.
(d) 70% of the debtors realized at 80% and remaining debtors were sold to a debt-collecting
agency for 50%.
(e) A liability in respect of workmen compensation is ascertained at Rs. 7,000/-. Realization
expenses were Rs. 3,000/-. Prepare necessary accounts to close the books of accounts.
3. A & B were partners sharing profits equally. On 31.03.2020, their Balance Sheet was as follows:
Liabilities Amount(Rs. Assets Amount(Rs.)
)
Creditors 1,00,000 Investments 90,000
Bank loan 50,000 Stock 60,000
B’s loan 30,000 Machinery 1,10,000
Invest. Fluct. Fund 10,000 Land & Building 40,000
Capitals: Debtors Rs. 80,000
A- Rs. 1,10,000 (-) provision 2,000 78,000
B- Rs. 90,000 2,00,000 Bank 12,000
3,90,000 3,90,000
The firm was dissolved on the above date.
(a) Stock was sold at 25% less than book value and machinery realized 20% more than book
value. Debtors of Rs. 10,000/- proved bad and rest paid the amount due.
(b) A typewriter which was not recorded, is taken over by A at Rs. 3,000/-.
(c) B took over 40% of the investments at 15% less and remaining investments were handed
over to a creditor of Rs. 60,000/- in full settlement. The balance payment of creditors was
made in cash.
(d) A was appointed to realize the assets and to pay off the liabilities, for which he was to be
paid a commission of Rs. 2,500/-.
(e) Land & Building was valued at Rs. 70,000/-. Bank took it to settle the bank loan of Rs.
50,000/- and paid the balance of Rs. 20,000/- to the firm. Prepare necessary accounts to
close the books of a/c’s.
4. A & B were partners with ratio 3:2. They decided to dissolve the firm. From the information
given below, complete Realization a/c, Partner’s capital a/c and cash a/c.
Realization a/c
Particulars Amount(Rs.) Particulars Amount(Rs.)
To Machinery 5,60,000 By Creditors 40,000
To Stock 90,000 By Mrs. A’s loan 25,000 65,000
To Debtors 55,000 7,05,000 By Cash:
To Cash a/c: Machinery 4,80,000
Creditors ? ? Debtors 10,000 4,90,000
To A’s capital: By A’s capital:
Mrs. A’s loan 34,000 34,000 Stock 1,28,000
To B’s capital: Typewriter 70,000 1,98,000
Expenses 7,000 7,000 By B’s capital:
To profit: Debtors 40,000 40,000
A’s capital 4,000
B’s capital 3,000 7,000
7,93,000 7,93,000
Partner’s Capital Accounts
Particulars A B Particulars A B
To Realization a/c ? ? By Balance b/d ? ?
To Cash a/c 4,00,000 4,50,000 By ………… ? ?
By ………… ? ?
Cash/ Bank a/c
Particulars Amount(Rs. Particulars Amount(Rs.)
)
To balance b/d ? By A’s loan a/c 4,000
To Realization a/c 4,90,000 By Realization a/c ?
By A’s capital 4,00,000
By B’s capital ?
? ?
5. Give journal entries for the following transactions on dissolution of the firm of A & B on 31 st
March,2020, after the transfer of various assets (except cash) and third parties liability to
realization account. They share profits in 3:2.
(a) Investments of Rs. 50,000/- realized at 20% less than book value.
(b) The firm had stock of Rs. 1,00,000/-. A took over half of the stock at 20% less than book
value and remaining stock was sold at 25% profit.
(c) Mrs. A’s loan of Rs. 12,000/- was taken over by partner A.
(d) B’s loan to the firm of Rs. 20,000/- was settled by paying Rs. 21,000/-.
(e) Furniture of Rs. 30,000/- was taken over by Bills payable of Rs. 40,000/- in full settlement of
their claim.
(f) They had a profit on realization Rs. 20,000/-.
(g) They had a balance of Rs. 10,000/- in reserve fund and Rs. 5,000/- in advertisement
suspense account.
6. Different cases of realization expenses.
(a) Realization expenses Rs. 10,000/- paid by the firm.
(b) Realization expenses Rs. 12,000/- paid by partner A on firm’s behalf.
(c) A was appointed to realize the assets for a remuneration of Rs. 15,000/- and realization
expenses were Rs. 10,000/-.
(d) A was appointed to realize the assets for a commission of Rs. 10,000/- and A was to bear the
realization expenses. Realization expenses Rs. 8,000/- paid by partner A.
(e) A was appointed to realize the assets for an agreed salary of Rs. 10,000/- and actual
expenses were to be borne by A only. Realization expenses Rs. 5,000/- paid by firm on A’s
behalf.
(f) A was given the task of dissolution for a remuneration of Rs. 10,000/- and actual expenses
were to be borne by A only. Actual expenses Rs. 6,000/- were paid by Partner B on A’s
behalf.
(g) Total realization expenses were Rs. 10,000/- out of it Rs. 6,000/- were to be borne by A and
remaining by the firm. But firm paid total expenses Rs. 10,000/-.