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    Home » NCERT Solutions for Class 12 Accountancy – Partnership Accounts – Chapter 4 – Dissolution of Partnership Firm
    Class 12 Accountancy

    NCERT Solutions for Class 12 Accountancy – Partnership Accounts – Chapter 4 – Dissolution of Partnership Firm

    AdminBy AdminUpdated:May 9, 202344 Mins Read
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    Short answers : Solutions of Questions on Page Number : 252


    Q1 :  State the difference between dissolution of partnership and dissolution of partnership firm.
    Answer :

    Basis of Difference

    Dissolution of Partnership

    Dissolution of Partnership firm

    Meaning

    It means change in the partnership deed (or the agreement) among the partners.

    It means that the business is wound up and the firm is dissolved.

    Discontinuation

    Business is not discontinued.

    Business is discontinued, as the firm is dissolved.

    Closure of Books of Accounts

    Books of accounts are not closed, as there is only change in the existing agreement between the partners.

    Books of accounts are closed, as the business is discontinued.

    Assets and Liabilities

    In this case, the assets and liabilities are revalued.

    In this case, all the assets are sold off in order to pay the liabilities of the business.

    Role of Court

    There is no intervention by the court.

    Dissolution of a partnership firm may be done with the consent of the court.

    Nature

    It is voluntary in nature.

    It may be voluntary (as per the discretion of the partners) or compulsory (as per the order of the court).

    Effect

    It may or may not involve dissolution of the firm.

    It necessarily involves dissolution of both the partnership as well as of the partnership firm.


    Q2 :State the accounting treatment for:
    i. Unrecorded assets
    ii. Unrecorded liabilities
    Answer :
    i) Accounting Treatment for Unrecorded Assets
    Unrecorded asset is an asset, the value of which has been written off in the books of accounts but the asset is still in usable position. The accounting treatment for unrecorded asset is:
    a) When the unrecorded asset is sold for cash

    Cash A/c

    Dr.

    To Realisation A/c

    (Unrecorded assets sold for cash)

    b) When the unrecorded asset is taken over by any partner

    Partner’s Capital A/c

    Dr.

    To Realisation A/c

    (Unrecorded asset taken over by the partner)

    ii) Accounting Treatment for Unrecorded Liabilities

    Unrecorded liabilities are those liabilities which are not recorded in the books of account. The accounting treatment for unrecorded liability is:

    a) When the unrecorded liability is paid off

    Realisation A/c

    Dr.

    To Cash A/c

    (Unrecorded liability paid in cash)

    b) When the unrecorded liability is taken over by a partner

    Realisation A/c

    Dr.

    To Partner’s Capital A/c

    (Unrecorded liability  taken over by the partner)


    Q3 : On dissolution, how you deal with partner’s loan if it appears on the
    (a) Assets side of the Balance Sheet
    (b) Liabilities side of the Balance Sheet
    Answer :
    a) If  partner’s loan appears on the assets side of the Balance Sheet then it implies that the partner has taken loan from the business and is liable to pay back to the business. In such case, the loan amount is transferred to his capital
    account. Thus the accounting entry will be:

    Partner’s Capital A/c

    Dr.

    To Partner’s Loan A/c

    (Partner’s loan transferred
    to Partner’s Capital Account)


    b)
    If partner’s loan appears on the liabilities side  of the Balance Sheet then it implies that the partner has forwarded loan to the firm and the firm is liable to pay back the amount to the partner. In such case, partner’s loan is paid off after paying all the external liabilities. The  partner’s loan is not transferred to the Realisation Account, in fact, it is
    paid in cash. The following accounting entry is passed.-

    Partner’s Loan A/c

    Dr.

    To Cash/Bank A/c

    (Partner’s loan paid in
    cash)


    Q4:  Distinguish between firm’s debts and partner’s private debts.
    Answer:

    Basis of Difference

    Firm’s
    Debts

    Partner’s
    Private Debts

    Meaning

    It refers to those debts that
    are borrowed against the name of the firm.

    It refers to those debts that
    are borrowed personally by the partner.

    Liability

    All the partners of the firm are
    jointly and separately liable for the firm’s debt.

    The concerned partner is
    personally liable for his private debts.

    Settlement of debts by private
    assets

    If the firm’s debt exceeds the
    firm’s assets, then private assets of the partners may be utilised to pay
    back the firm’s debt, if only  the partner’s  private assets exceeds his/her
    own private debts.

    Private debts are settled
    against the partner’s private assets. Subsequently, if any surplus exists
    then this may be utilised to settle the firm’s debts.

    Settlement of debts by firm’s
    assets

    Firm’s debts are settled against
    the firm’s assets. Subsequently, if any surplus exists, then this is
    distributed among the partners.

    After paying off firm’s debts,
    the surplus of firm’s assets, if any is distributed among the partners.  The
    personal share of the partner in this surplus can be utilised to settle
    his/her own private debts.


    Q5:  State the order of settlement of accounts on dissolution.
    Answer: The following are the rules of settlement of accounts on  dissolution as per the Section 48 of Partnership Act 1932.
    1. Application of Assets: Amount received by  the realisation (sale) of the assets shall be used in the following order:
    a) First of all the external liabilities and expenses are to be paid.
    b) Then, all loans and advances  forwarded by the partners should be paid.
    c) Then, the capital of each partner should be paid off. If there remains any surplus after the payment of (a), (b)and (c), then it should be distributed among the partners in their profitsharing ratio.
    2. Treatment of Loss: In case of loss and any  deficiency of capital this should be paid in the following order:
    a) First these should be adjusted  against firm’s profits.
    b) Then, against the total capital of the firm.
    c)Even if  there exists any loss and deficiencies then it should be borne by all the partners individually in  their profit sharing ratio.


    Q6: On what account realisation account differs from revaluation account.
    Answer:

    Basis of Difference

    Realisation Account

    Revaluation Account

     Meaning

    It records the sale of various assets and payment of various liabilities.

    It records the effect of revaluation of assets and liabilities on the eve of admission, retirement, death and change in the profit sharing ratio.

    Time

    It is prepared at the time of dissolution of firm.

    It is prepared when admission/retirement/death or change in profit sharing ratio takes place.

    Objective

    To find profit or loss on realisation of assets and payment of liabilities.

    To find out profit or loss on revaluation of assets and liabilities.

    Amount

    Assets and liabilities are shown at the book value.

    Increase or decrease in the value of assets and liabilities are shown in this account.

    Records

    All assets and liabilities are recorded here.

    Only those assets and liabilities are recorded here whose values have changed over a period of time.

    Effect

    All accounts of assets and liabilities are closed.

    No account is closed on revaluation of assets and liabilities.


    Short answers numerical questions long answers : Solutions of Questions on Page Number : 253


    Q1 :Journalise the following transactions regarding Realisation expenses:
    [a] Realisation expenses amounted to Rs 2,500.
    [b] Realisation expenses amounting to Rs 3,000 were paid by Ashok, one of the partners.
    [c] Realisation expenses Rs 2,300 borne by Tarun, personally.
    [d] Amit, a partner was appointed to realise the assets, at a cost of Rs 4,000. The actual amount of Realisation amounted to Rs 3,000.
    Answer:

    Journal

     

     

    Particulars

    L.F.

    Amount

    Rs

    Amount

    Rs

    (a)

    Realisation A/c

    Dr.

    2,500

    To Bank A/c

    2,500

    (Realisation expenses paid)

    (b)

    Realisation A/c

    Dr.

    3,000

    To Ashok’s
    Capital A/c

    3,000

    (Realisation expenses paid
    by Ashok)

    (c)

    No entry, as all Realisation
    expenses are borne personally by Tarun

    (d)

    Realisation A/c

    Dr.

    4,000

    To Amit’s
    Capital A/c

    4,000

    (Realisation expenses paid
    to Amit)


    Q2 :Explain the process of dissolution of a partnership firm?
    Answer :  Dissolution of partnership firm implies discontinuation of the business of the partnership firm. According to the Section 39 of Partnership Act, dissolution of partnership between all the partners of a firm is called dissolution of partnership firm. Dissolution involves winding up of business, disposal of assets and paying off the liabilities and distribution of any surplus or borne of loss by the partners of the firm. As per the Partnership Act 1932, a partnership firm may be dissolved in the following manners:

    1) Dissolution by Agreement
    A firm may be dissolved with:
    a) the consent of all the partners, or
    b) the contract between the partners
    2) Compulsory Dissolution
    A firm may be dissolved by:
    a) the adjudication of all the partners or of all partners but one as insolvent
    b) happening of an event or change in government policies that make the business unlawful.
    3) Dissolution on the happening of Certain Contingencies
    Subject to the contract between the partners, a firm is dissolved
    a) if formed for a specific period then on the expiry of the period
    b) if formed for a specific purpose then on completion of the purpose
    c) on the death of partner/partners
    d) on insolvency of a partner/partners
    4) Dissolution by Notice
    If partnership is at will then the partnership firm is dissolved if any partner giving notice in writing to all the other partners expressing his/her intention to dissolve the firm.
    5) Dissolution by Court
    The court may order to dissolve a partnership firm when:
    a) a partner becomes insane or lunatic.
    b) a partner becomes permanently incapable of performing the duties.
    c) a partner is guilty of misconduct and affects the business activities.
    d) a partner repeatedly breaks the terms of agreement .
    e) a partner transfers his interest to a third party without the consent of other partners.
    f) a business persistently incurs losses.
    Besides these above mentioned circumstances, a partnership firm may be dissolved if the court at any stage finds dissolution of the firm to be justified and inevitable.
    The following are the rules of settlement of accounts on dissolution as per the Section 48 of Partnership Act 1932.
    1. Application of Assets: Amount received by the realisation (sale) of the assets shall be used in the following order:
    a) First of all the external liabilities and expenses are to be paid.
    b) Then, all loans and advances forwarded by the partners should be paid.
    c) Then, the capital of each partners should be paid off. If there remains any surplus after the payment of (a), (b) and (c), then it should be distributed among the partners in their profit sharing ratio.
    2. Treatment of Loss: In case of loss and any deficiency of capital, then this should be paid in the following order:
    a) First these should be adjusted against firm’s profits.
    b) Then, against the total capital of the firm.
    c) If still there exists any loss and deficiencies, then it should be borne by all the partners individually in their profit sharing ratio.


    Q3 : Record necessary journal entries in the following cases:
    [a] Creditors worth Rs 85,000 accepted Rs 40,000 as cash and Investment worth Rs 43,000, in full settlement of their claim.
    [b] Creditors were Rs 16,000. They accepted Machinery valued at Rs 18,000 in settlement of their claim.
    [c] Creditors were Rs 90,000. They accepted Buildings valued Rs 1,20,000 and paid cash to the firm Rs 30,000.
    Answer :

    Journal

     

     

    Particulars

    L.F.

    Amount

    Rs

    Amount

    Rs

    (a)

    Realisation A/c

    Dr.

    40,000

    To Cash A/c

    40,000

    (Creditors worth Rs 85,000 accepted 40,000 as cash and
    investment

    worth Rs 43,000 in their full settlement)

    (b)

    No Entry

    (Creditors Rs 16,000 accepted Machinery Rs 18,000 in
    the full

    settlement. No entry is required since both asset and
    liability are

    already transferred to the Realisation Account)

    (c)

    Cash A/c

    Dr.

    30,000

    To Realisation A/c

    30,000

    (Creditors worth Rs 90,000 accepted buildings worth Rs
    1,20,000 and

    returned Rs 30,000 as cash after settlement of claim to
    the firm)


    Q4 :What is a Realisation Account?
    Answer : On dissolution of a firm, all the books of account are closed, all assets are sold and all liabilities are paid off. In order to record the sale of assets and discharge of liabilities, a nominal account is opened named Realisation Account. The main purpose to open Realisation Account is to ascertain the profit or loss due to the realisation of assets and liabilities. Realisation profit (if credit side > debit side) or realisation loss (if debit side > credit side) are transferred to the Partner’s Capital Account in their profit sharing ratio.
    Concisely, following are the important objectives of preparing Realisation Account.
    1) To close all the books of account.
    2) To record transactions relating to the sale of assets and discharge of liabilities.
    3) To determine profit or loss due to the realisation of assets and liabilities.
    Accounting treatment of items related to Realisation Account
    1) For transfer of assets

    Realisation A/c

    Dr.

    To Sundry Assets A/c
    (Individually)

    (All Assets transferred to
    realisation account, except

    Cash/Bank, P and L debit
    balance, Loan to a Partner)

    2) For transfer of liabilities

    Sundry Liabilities A/c
    (Individually)

    Dr.

    To Realisation A/c

    (All Liabilities transferred
    to Realisation account except

    Partner’s Capitals, P and L
    credit balance, Loan from Partner)

    3) For sale of assets

    Bank A/c (Amount received)

    Dr.

    To Realisation A/c

    (Assets sold for cash)

    4) For payment of liabilities

    Realisation A/c

    Dr.

    To Bank A/c

    (Liabilities paid in cash)

    5) For payment of realisation expenses

    Realisation A/c

    Dr.

    To Bank A/c

    (Expenses paid)

    6) For transfer of profit on realisation

    Realisation A/c

    Dr.

    To Partner’s Capital A/c

    (Profit on realisation
    transferred to partner ‘s capital account)

    7) For transfer of loss on realisation

    Partner’s Capital A/c

    Dr.

    To Realisation A/c

    (Loss transferred to
    partner’s capital account)

    Format of
    Realisation Account

    Dr.

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Various Assets

    (Excluding Cash/Bank, fictitious assets, Debit balance of
    P and L A/c, partner Capital A/c, Current A/c, Loan to Partner)

     

    Cash/Bank

    (Payment for realisation
    expenses)

     

     

    Cash/Bank

    (Payment to outside and
    unrecorded liabilities)

     

     

    Partner’s Capital A/c

    (If any liability taken on expenses paid by him or
    remuneration payable to him)

    Partner Capital A/c

    (Profit on realisation distributed in the profit sharing
    ratio among all the partners)

    –

    –

    –

    –

    Various Liabilities

    (Excluding Partner Capital account, reserves, P and L A/c,
    Current A/c, Loan to Partner)

     

     

    Provision on assets

    (like, Provision for doubtful debts; Provision for
    depreciation)

     

    Cash/Bank

    (Amount received from
    realisation of assets and unrecorded assets)

     

    Partner ‘s Capital A/c

    (If any asset taken over by any partner)

    Partner Capital A/c

    (Loss on realisation borne by all the partners in their
    profit sharing ratio)

    –

    –

    –

    –

    –

    –


    Q5 : There was an old computer which was written-off in the books of Accounts in the pervious year. The same has been taken over by a partner Nitin for Rs 3,000. Journalise the transaction, supposing. That the firm has been dissolved.
    Answer :

    Journal

     

    Particulars

    L.F.

    Amount

    Rs

    Amount

    Rs

    Nitin’s
    Capital A/c

    Dr.

    3,000

    To Realisation A/c

    3,000

    (Unrecorded computer taken over by Nitin)


    Q6 : Reproduce the format of Realisation Account.
    Answer :

    Format of
    Realisation Account

    Dr.

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Various Assets

    (Excluding Cash/Bank, fictitious assets, Debit balance of
    P and L A/c, partner Capital A/c, Current A/c, Loan to Partner)

     

    Cash/Bank

    (Payment for realisation
    expenses)

     

     

    Cash/Bank

    (Payment to outside and
    unrecorded liabilities)

     

     

    Partner’s Capital A/c

    (If any liability taken on expenses paid by him or
    remuneration payable to him)

    Partner Capital A/c

    (Profit on realisation distributed in the profit sharing
    ratio among all the partners)

    –

    –

    –

    –

    Various Liabilities

    (Excluding Partner Capital account, reserves, P and L A/c,
    Current A/c, Loan to Partner)

     

     

    Provision on assets

    (like, Provision for doubtful debts; Provision for
    depreciation)

     

    Cash/Bank

    (Amount received from
    realisation of assets and unrecorded assets)

     

    Partner ‘s Capital A/c

    (If any asset taken over by any partner)

    Partner Capital A/c

    (Loss on realisation borne by all the partners in their
    profit sharing ratio)

    –

    –

    –

    –

    –

    –


    Q7: What journal entries will be recorded for the following transactions on the dissolution of a firm:
    [a] Payment of unrecorded liabilities of Rs 3,200.
    [b] Stock worth Rs 7,500 is taken by a partner Rohit.
    [c] Profit on Realisation amounting to Rs 18,000 is to be distributed between the partners Ashish and Tarun in the ratio of 5:7.
    [d] An unrecorded asset realised Rs 5,500.
    Answer :

    Journal

    Particulars

    L.F.

    Amount

    Rs

    Amount

    Rs

    (a)

    Realisation
    A/c

    Dr.

    3,200

    To Bank A/c

    3,200

     

    (Unrecorded liabilities
    paid)

    (b)

    (Rohit’s
    Capital A/c

    Dr.

    7,500

    To Realisation A/c

    7,500

    (Stock is taken over by Rohit)

    (c)

    Realisation
    A/c

    Dr.

    18,000

    To Ashish’s Capital A/c

    7,500

    To Tarun’s Capital A/c

    10,500

    (Profit on Realisation is transferred to Partners’ Capital Account)

    (d)

    Bank A/c

    Dr.

    5,500

    To Realisation A/c

    5,500

    (Unrecorded asset sold)


    Q8: How deficiency of creditors is paid off?
    Answer : At the time of dissolution of a firm, the amount received from the sale of firm’s assets are utilised to pay the creditors. If the sale receipts fall short, then partners’ private assets are used for settling the dues of the firm’s creditors. Even if some portion of the amount due to creditors is left unpaid, then there arises deficiency of creditors. There are generally two procedures to be followed to treat the deficiency of creditors.
    1. Transferring deficiency to the Deficiency Account
    2. Transferring deficiency to the Partner’s Capital Account
    In the former procedure, a separate account is prepared for the firm’s creditors. Then in order to ascertain the firm’s cash balance accruing from the sale of the firm’s assets and partners’ private assets, Cash Account is prepared. After ascertaining the cash availability with the firm, the creditors and the external liabilities are paid proportionately (partially). The remaining unpaid creditors or the deficiency is transferred to the Deficiency Account.
    In the latter procedure, creditors are paid by the cash available with the firm including the partners individual contribution. The deficiency or unpaid creditors amount is transferred to the Partner’s Capital Account. Thus the deficiency of the creditors is borne by all the partners in their profit sharing ratio. If any partner becomes insolvent and is unable to bear the deficiency, then this will be regarded as a capital loss to the firm. If the partnership deed is silent about such capital loss in the facet of insolvency of a partner, then according to the Garner v/s Murray case, such capital loss need to be borne by the solvent partners in their capital ratio.


    Q9: Give journal entries for the following transactions:
    1. To record the Realisation of various assets and liabilities,
    2. A Firm has a Stock of Rs 1,60,000. Aziz, a partner took over 50% of the Stock at a discount of 20%,
    3. Remaining Stock was sold at a profit of 30% on cost,
    4. Land and Buildging (book value Rs 1,60,000) sold for Rs 3,00,000 through a broker who charged 2%, commission on the deal,
    5. Plant and Machinery (book value Rs 60,000) was handed over to a Creditor at an agreed valuation of 10% less than the book value,
    6. Investment whose face value was Rs 4,000 was realised at 50%.
    Answer:

    Journal

     

    Particulars

    L.F.

    Amount

    Rs

    Amount

    Rs

    1)

    (a)

    For Transfer of Assets

    Realisation
    A/c

    Dr.

    –

    To Assets
    A/c (Individually)

    –

    (Assets transferred to Realisation Account)

    (b)

    For Transfer of Liabilities

    Liabilities A/c
    (Individually)

    Dr.

    –

    To Realisation A/c

    –

    (Liabilities transferred to Realisation Account)

    (c)

    For sale of Asset

    Cash/Bank A/c

    Dr.

    –

    To Realisation A/c

    –

    (Assets sold)

    (d)

    For liabilitiy
    paid

    Realisation
    A/c

    Dr.

    –

    To
    Cash/Bank A/c

    –

    (Liabilities paid)

    2)

    Aziz’s Capital A/c

    Dr.

    64,000

    To Realisation A/c

    64,000

    (Aziz, a partner took over
    50% of stock at 20% discount, the value

    of the total stock  was
    Rs 1,60,000)

    [1,60,000 × (50/100) ×
    (80/100) = Rs 64,000]

    3)

    Bank A/c

    Dr.

    1,04,000

    To Realisation A/c

    1,04,000

    (Stock worth Rs 80,000
    sold at a profit of 30% on cost)

    [80,000 × (130/100 = Rs
    1,04,000)]

    4)

    Bank A/c

    Dr.

    2,94,000

    To Realisation A/c

    2,94,000

    (Land and Building sold for
    Rs 3,00,000 and 2% commission

    paid to the broker)

    5)

    No entry

    (Plant and Machinery Rs
    60,000 handed over to the creditors at a

    discount
    of 10%.  No entry is required as both the asset and liability

    are already transferred to
    the Realisation Account)

    6)

    Bank A/c

    Dr.

    2,000

    To Realisation A/c

    2,000

    (Investments worth Rs 4,000
    were realised at 50%)

    NOTE: In this chapter, it has been assumed that all receiving  and payments are made through bank.


    Q10: How will you deal with the Realisation expenses of the firm of Rashim and Bindiya in the following cases:
    1. Realisation expenses amounts to Rs 1,00,000,
    2. Realisation expenses amounting to Rs 30,000 are paid by Rashim, a partner.
    3. Realisation expenses are to be borne by Rashim for which he will be paid Rs 70,000 as remuneration for completing the dissolution process. The actual expenses incurred by Rashim were Rs 1,20,000.
    Answer :

    Books of Rashim and Bindiya

     

    Journal

     

     

    Particulars

    L.F.

    Amount

    Rs

    Amount

    Rs

    1)

    Realisation A/c

    Dr.

    1,00,000

    To Bank A/c

    1,00,000

    (Realisation expenses paid)

    2)

    Realisation A/c

    Dr.

    30,000

    To Rashim’s
    Capital A/c

    30,000

    (Realisation expenses borne
    by Rashim)

    3)

    Realisation A/c

    Dr.

    70,000

    To Rashim’s
    Capital A/c

    70,000

    (Realisation expenses borne
    by Rashim and remuneration to him

    for dissolution Rs 70,000)


    Q11: The book value of assets (other than cash and bank) transferred to Realisation Account is Rs 1,00,000. 50% of the assets are taken over by a partner Atul, at a discount of 20%; 40% of the remaining assets are sold at a profit of 30% on cost; 5% of the balance being obsolete, realised nothing and remaining assets are handed over to a Creditor, in full settlement of his claim.
    You are required to record the journal entries for Realisation of assets.
    Answer :

    Journal

     

    Particulars

    L.F.

    Amount

    Rs

    Amount

    Rs

    Realisation A/c

    Dr.

    1,00,000

    To Sundry
    Assets A/c

    1,00,000

    (Assets other than cash and
    bank transferred to Realisation Account)

    Atul’s Capital A/c

    Dr.

    40,000

    To
    Realisation A/c

    40,000

    (Atul took over 50% of
    assets worth Rs 1,00,000 at 20% discount)

    [1,00,000 × (50/100) ×
    (80/100)]

    Bank A/c

    Dr.

    26,000

    To
    Realisation A/c

    26,000

    (Assets worth Rs 20,000,
    i.e. 40% of assets of Rs 50,000 are sold

    at a profit of 30%) [50,000
    × (40/100) × (130/100)]

    No entry is made for
    obsolescence of the assets and the assets given

    to the creditors in the full
    settlement as these are already transferred to

    the Realisation Account and
    adjusted)


    Q12: Record necessary journal entries to record the following unrecorded assets and liabilities in the books of Paras and Priya:
    1. There was an old furniture in the firm which had been written-off completely in the books. This was sold for Rs 3,000,
    2. Ashish, an old customer whose Account for Rs 1,000 was written-off as bad in the previous year, paid 60%, of the amount,
    3. Paras agreed to take over the firm’s goodwill (not recorded in the books of the firm), at a valuation of Rs 30,000,
    4. There was an old typewriter which had been written-off completely from the books. It was estimated to realize Rs 400. It was taken away by Priya at an estimated price less 25%,
    5. There were 100 shares of Rs 10 each in Star Limited acquired at a cost of Rs 2,000 which had been written-off completely from the books. These shares are valued @ Rs 6 each and divided among the partners in their profit sharing ratio.
    Answer :

     Books of Paras and Priya

     

    Journal

     

     

    Particulars

    L.F.

    Amount

    Rs

    Amount

    Rs

    1)

    Bank A/c

    Dr.

    3,000

    To
    Realisation A/c

    3,000

    (Unrecorded furniture sold)

    2)

    Bank A/c

    Dr.

    600

    To
    Realisation A/c

    600

    (Bad Debt recovered which
    was previously written off as bad)

    3)

    Paras’s Capital A/c

    Dr.

    30,000

    To Realisation A/c

    30,000

    (Unrecorded goodwill taken
    over by Paras)

    4)

    Priya’s Capital A/c

    Dr.

    300

    To
    Realisation A/c

    300

    (Unrecorded Typewriter estimated
    Rs 400 taken over by Priya at

    25% less price)

    5)

    Paras’s Capital A/c

    Dr.

    300

    Priya’s Capital A/c

    Dr.

    300

    To
    Realisation A/c

    600

    (100 shares of Rs 10 each
    which were not recorded in the books

    taken @ Rs 6 each by Paras
    and Priya and divided between them in

    their profit sharing ratio)


    Q13: All partners wishes to dissolve the firm. Yastin, a partner wants that her loan of Rs 2,00,000 must be paid off before the payment of capitals to the partners. But, Amart, another partner wants that the capitals must be paid before the payment of Yastin’s loan. You are required to settle the conflict giving reasons.
    Answer :
    As per section 48 of Partnership Act 1932, at the time of dissolution, loans and advances from the partners must be paid off before the settlement of their capital accounts. Hence, Yastin’s argument is correct that her loan of Rs 2,00,000 must be paid off before the payment of partners’ capital.


    Q14:  What journal entries would be recorded for the following transactions on the dissolution of a firm after various assets (other than cash) on the third party liabilities have been transferred to Reliasation Account.
    1. Arti took over the Stock worth Rs 80,000 at Rs 68,000.
    2. There was unrecorded Bike of Rs 40,000 which was taken over By Mr. Karim.
    3. The firm paid Rs 40,000 as compensation to employees.
    4. Sundry creditors amounting to Rs 36,000 were settled at a discount of 15%.
    5. Loss on Realisation Rs 42,000 was to be distributed between Arti and Karim in the ratio of 3:4.
    Answer :

    Journal 

     

    Particulars

    L.F.

    Amount

    Rs

    Amount

    Rs

    1

    Arti’s
    Capital A/c

    Dr.

    68,000

    To Realisation A/c

    68,000

    (Arti
    took over stock worth Rs 80,000 at Rs 68,000)

    2.

    Karim’s
    Capital A/c

    Dr.

    40,000

    To Realisation A/c

    40,000

    (Karim
    took over an unrecorded bike of  Rs 40,000)

    3.

    Realisation
    A/c

    Dr.

    40,000

    To Bank A/c

    40,000

    (Compensation paid to the
    employees )

    4.

    Realisation
    A/c

    Dr.

    30,600

    To Bank A/c

    30,600

    (Creditors amounting Rs
    36,000 were settled at a discount of 15%)

    [36,000 × (85/100)]

    5.

    Arti’s
    Capital A/c

    Dr.

    18,000

    Karim’s
    Capital A/c

    Dr.

    24,000

    To Realisation A/c

    42,000

    (Loss on Realisation
    transferred to Partners’ Capital Account)


    Q15: Rose and Lily shared profits in the ratio of 2:3. Their Balance Sheet on March 31, 2012 was as follows:

      

    Balance Sheet of Rose and Lily as on March 31, 2006*

     

     

    Liabilities

    Amount

    Rs

    Assets

    Amount

     Rs

    Creditors

    40,000

    Cash

     

    16,000

    Lily’s loan

    32,000

    Debtors

    80,000

     

    Profit and Loss

    50,000

    Less: Provision for doubtful Debts

    3,600

    76,400

    Capitals:

     

     

     

     

    Lily

    1,60,000

    Inventory

     

    1,09,600

    Rose

    2,40,000

    Bills Receivable

     

    40,000

     

     

    Buildings

     

    2,80,000

     

    5,22,000

     

     

    5,22,000

     

     

     

     

     

               

     Rose and Lily decided to dissolve the firm on the above date. Assets (except bills receivables) realised Rs 4,84,000. Bills Receivable were taken over by Rose at Rs 30,000. Creditors agreed to take Rs 38,000. Cost of Realisation was Rs 2,400. There was a Motor Cycle in the firm which was bought out of the firm’s money, was not shown in the books of the firm. It was now sold for Rs 10,000. There was a contingent liability in respect of outstanding electric bill of Rs 5,000, Bill Receivable taken over by Rose at Rs 33,000.
    Show Realisation Account, Partners Capital Account, Loan Account and Cash Account.
    * As per the question, this should be March 31, 2012
    Answer:

    Books of Rose and Lily

     

    Realisation Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Debtors

    80,000

    Provision for Doubtful Debts

    3,600

    Inventory

    1,09,600

    Creditors

    40,000

    Bills Receivables

    40,000

    Cash:

    Buildings

    2,80,000

    Motor cycle

    10,000

    Cash:

    Other Assets

    4,84,000

    4,94,000

    Outstanding Electricity Bill

    5,000

    Rose’s Capital (Bills Receivable)

    33,000

    Creditors

    38,000

    Expenses

    2,400

    45,400

    Profit transferred to:

    Rose’ Capital

    6,240

    Lily’s Capital

    9,360

    15,600

    5,70,600

    5,70,600

    Partners’ Capital Account

    Dr.

     

    Cr.

    Particulars

    Rose

    Lily

    Particulars

    Rose

    Lily

    Realisation  (Bills Receivable)

    33,000

    Balance b/d

    2,40,000

    1,60,000

    Cash A/c

    2,33,240

    1,99,360

    Profit and Loss

    20,000

    30,000

    Realisation  (Profit)

    6,240

    9,360

    2,66,240

    1,99,360

    2,66,240

    1,99,360

    Lily’s Loan Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Cash

    32,000

    Balance b/d

    32,000

    32,000

    32,000

    Cash Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Balance b/d

    16,000

    Realisation:

    Realisation:

    Creditors

    38,000

    Motor Cycle

    10,000

    Outstanding Electricity Bill

    5,000

    Other Assets

    4,84,000

    4,94,000

    Expenses

    2,400

    45,400

    Lily’s Loan

    32,000

    Rose’s Capital A/c

    2,33,240

    Lily’s Capital A/c

    1,99,360

    5,10,000

    5,10,000

     Note: In the solution Contingent Liability of Electricity Bill has been treated as Electricity Bill Payable. Further, it is also been assumed that Rosy has taken over Bills Receivable at Rs 33,000.


    Q16: Shilpa, Meena and Nanda decided to dissolve their partnership on March 31,2006. Their profit sharing ratio was 3:2:1 and their Balance Sheet was as under:

    Balance Sheet of Shilpa, Meena and Nanda as on
    March 31, 2006

     

    Liabilities

    Amount

    Rs

    Assets

    Amount

    Rs

    Capitals:

    Land

    81,000

    Shilpa

    80,000

    Stock

    56,760

    Meena

    40,000

    Debtors

    18,600

    Bank
    loan

    20,000

    Nanda’s Capital Account

    23,000

    Creditors

    37,000

    Cash

    10,840

    Provision
    for doubtful debts

    1,200

    General
    Reserve

    12,000

     

    1,90,200

    1,90,200

     

     

     

     

     The stock of value of Rs 41,660 are taken over by Shilpa for Rs 35,000 and she agreed to discharge bank loan. The remaining stock was sold at Rs 14,000 and debtors amounting to Rs 10,000 realised Rs 8,000. land is sold for Rs 1,10,000. The remaining debtors realised 50% at their book value. Cost of Realisation amounted to Rs 1,200. There was a typewriter not recorded in the books worth Rs 6,000 which  were taken over by one of the Creditors at this value. Prepare Realisation Account.
    Answer:

    In the books of Shilpa, Meena and Nanda

     

    Realisation Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Land

    81,000

    Bank Loan

    20,000

    Stock

    56,760

    Creditors

    37000

    Debtors

    18,600

    Provision for doubtful debts

    1,200

    Shilpa’s
    Capital A/c

    20,000

    Shilpa’s
    Capital A/c (Stock)

    35,000

    Cash :

    Cash:

    Creditors

    31000

    Stock

    14000

    Realisation Expenses

    1,200

    32200

    Debtors

    12300

    Profit transferred to

    Land

    1,10,000

    1,36,300

    Shilpa’s Capital A/c

    10,470

    Meena’s Capital A/c

    6,980

    Nanda’s Capital A/c

    3,490

    20,940

    2,29,500

    2,29,500

    Partners’ Capital Account

    Dr.

     

    Cr.

    Particulars

    Shilpa

    Meena

    Nanda

    Particulars

    Shilpa

    Meena

    Nanda

    Balance b/d

    –

    –

    23,000

    Balance
    b/d

    80,000

    40,000

    –

    Realisation

    35,000

    General Reserve

    6,000

    4,000

    2,000

    (Stock)

    Realisation

    20,000

    Cash

    81,470

    50,980

    (Bank Loan)

    Realisation
    (Profit)

    10,470

    6,980

    3,490

    Cash

    17,510

    1,16,470

    50,980

    23,000

    1,16,470

    50,980

    23,000

    Cash Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Balance b/d

    10,840

    Realisation
    (Expenses)

    32,200

    Realisation
    (Assets)

    1,36,300

    Shilpa’s
    Capital A/c

    81,470

    Nanda’s
    Capital A/c

    17,510

    Meena’s
    Capital A/c

    50,980

    1,64,650

    1,64,650


    Q17: Surjit and Rahi were sharing profits (losses) in the ratio of 3:2, their Balance Sheet as on March 31, 2004* is as follows:

    Balance Sheet of Surjit and Rahi as on March 31, 2012

     

    Liabilities

    Amount

    Rs

    Assets

    Amount

    Rs

    Creditors

    38,000

    Bank

    11,500

    Mrs. Surjit loan

    10,000

    Stock

    6,000

    Reserve

    15,000

    Debtors

    19,000

    Rahi’s loan

    5,000

    Furniture

    4,000

    Capital’s:

    Plant

    28,000

    Surjit

    10,000

    Investment

    10,000

    Rahi

    8,000

    Profit and Loss

    7,500

     

    86,000

    86,000

     

     

     

     

     The firm was dissolved on March 31, 2012 on the following terms:
    1. Surjit agreed to take the investments at Rs 8,000 and to pay Mrs. Surjit’s loan.
    2. Other assets were realised as follows:

    Stock

    Rs

    5,000

    Debtors

    Rs

    18,500

    Furniture

    Rs

    4,500

    Plant

    Rs

    25,000

    3. Expenses on Realisation amounted to Rs 1,600.
    4. Creditors agreed to accept Rs 37,000 as a final settlement.
    You are required to prepare Realisation Account, Partners’ Capital Account and Bank Account.
    * As per the question, the year should be 2012 and not 2004
     Answer:

    Books of Surjit and Rahi

     

    Realisation Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Stock

    6,000

    Creditors

    38,000

    Debtors

    19,000

    Mrs. Surjit’s Loan

    10,000

    Furniture

    4,000

    Surjit’s Capital A/c (Investment)

    8,000

    Plant

    28,000

    Bank:

    Investment

    10,000

    Stock

    5,000

    Surjit’s Capital A/c

    10,000

    Debtors

    18,500

    (Mrs. Surjit’s Loan)

    Furniture

    4,500

    Bank:

    Plant

    25,000

    53,000

    Expenses

    1,600

    Loss transferred to:

    Creditors

    37,000

    38,600

    Surjit’s Capital A/c

    3,960

    Rahi’s Capital A/c

    2,640

    6,600

    1,15,600

    1,15,600

    Partners’ Capital Account

    Dr.

    Cr.

    Particulars

    Surjit

    Rahi

    Particulars

    Surjit

    Rahi

    Realisation (Investment)

    8,000

    Balance b/d

    10,000

    8,000

    Realisation (Loss)

    3,960

    2,640

    Realisation (Mrs. Surjit Loan)

    10,000

    Profit and Loss

    4,500

    3,000

    Bank

    12,540

    8,360

    Reserve

    9,000

    6,000

    29,000

    14,000

    29,000

    14,000

    Rahi’s Loan Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Balance b/d

    5,000

    Bank

    5,000

    5,000

    5,000

    Bank Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Balance b/d

    11,500

    Realisation (Creditors and Expenses)

    38,600

    Realisation A/c (Assets realised)

    53,000

    Rahi’s Loan

    5,000

    Surjit’s Capital A/c

    12,540

    Rahi’s Capital A/c

    8,360

    64,500

    64,500


    Q18: Rita, Geeta and Ashish were partners in a firm sharing profits/losses in the ratio of 3:2:1. On March 31, 2012 their balance sheet was as follows: 

    Liabilities

    Amount

    Rs

    Assets

    Amount

    Rs

    Capitals:

    Cash

    22,500

    Rita

    80,000

    Debtors

    52,300

    Geeta

    50,000

    Stock

    36,000

    Ashish

    30,000

    1,60,000

    Investments

    69,000

    Creditors

    65,000

    Plant

    91,200

    Bills payable

    26,000

    General reserve

    20,000

     

     

    2,71,000

    2,71,000

     

     

     

     

     

     On the date of above mentioned date the firm was dissolved:
    1. Rita was appointed to realise the assets. Rita was to receive 5% commission on the rate of assets (except cash) and was to bear all expenses of Realisation,
    2. Assets were realised as follows:

     

    Rs

    Debtors

    30,000

    Stock

    26,000

    Plant

    42,750

    3. Investments were realised at 85% of the book value,
    4. Expenses of Realisation amounted to Rs 4,100,
    5. Firm had to pay Rs 7,200 for outstanding salary not provided for earlier,
    6. Contingent liability in respect of bills discounted with the bank was also materialised and paid off Rs 9,800,
    Prepare Realisation Account, Capital Accounts of Partners’ and Cash Account.
    Answer:

     

    In the books of Rita, Geeta and Ashish

     

    Realisation Account

     

    Dr.

     

    Cr.

     

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Debtors

    52,300

    Creditors

    65,000

    Stock

    36,000

    Bills Payable

    26,000

    Investment

    69,000

    Cash:

     

    Plant

    91,200

    Debtors

    30,000

     

    Cash:

     

    Stock

    26,000

     

    Outstanding Salaries

    7,200

     

    Plant

    42,750

     

    Discounted Bill

    9,800

     

    Investment

    58,650

    1,57,400

    Creditors

    65,000

     

     

     

    Bills Payable

    26,000

    1,08,000

    Loss transferred to

     

    Rita’s Capital A/c

     

    7,870

    Rita’s Capital A/c

    57,985

     

    (Commission- 1,57,400 ´ 5/100)

     

    Geeta’s Capital A/c

    38,657

     

     

     

     

    Ashish’s Capital A/c

    19,328

    1,15,970

     

     

     

     

     

     

     

     

    364370

     

     

    364370

     

     

     

     

     

     

                       

     

    Partners’ Capital Account

     

    Dr.

     

    Cr.

     

    Particulars

    Rita

    Geeta

    Ashish

    Particulars

    Rita

    Geeta

    Ashish

    Realisation (Loss)

    57,985

    38,657

    19,328

    Balance b/d

    80,000

    50,000

    30,000

    Bank

    39,885

    18,010

    14,005

    General Reserve

    10,000

    6,667

    3,333

     

     

     

     

    Realisation

    7,870

     

     

     

     

     

     

     

     

     

     

     

    97,870

    56667

    33333

     

    97870

    56,667

    33,333

     

     

     

     

     

     

     

     

                       

     

    Cash Account

     

    Dr.

     

    Cr.

     

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

     

    Balance b/d

    22,500

    Realisation A/c

    1,08,000

     

    Realisation

    1,57,400

    Rita’s Capital

    39,885

     

     

     

    Geeta’s Capital A/c

    18,010

     

     

     

    Ashish’s Capital A/c

    14,005

     

     

     

     

     

     

     

    1,79,900

     

    1,79,900

     

     

     

     

     

     

                 

     NOTE: As per the solution, the Loss on Realisation should be Rs 1,15,970 and the total of Cash Account should be Rs 1,79,900; however, the answer given in the book shows Rs 1,29,455 and Rs 1,65,705 respectively.

     

     


    Q19: Anup and Sumit are equal partners in a firm. They decided to dissolve the partnership on December 31, 2012. When the balance sheet is as under:

    Balance Sheet of Anup and Sumit as on December 31, 2012

     

    Liabilities

    Amount

    Rs

    Assets

    Amount

    Rs

    Sundry Creditors

    27,000

    Cash at bank

    11,000

    Reserve fund

    10,000

    Sundry Debtors

    12,000

    Loan

    40,000

    Plants

    47,000

    Capital

    Stock

    42,000

    Anup

    60,000

    Lease hold land

    60,000

    Sumit

    60,000

    1,20,000

    Furniture

    25,000

     

     

    1,97,000

    1,97,000

     

     

     

     

     

     The Assets were realised as follows:

     

    Rs

    Lease hold land

    72,000

    Furniture

    22,500

    Stock

    40,500

    Plant

    48,000

    Sundry Debtors

    10,500

     The Creditors were paid Rs 25,500 in full settlement. Expenses of Realisation amount to Rs 2,500.
    Prepare Realisation Account, Bank Account, Partners Capital Accounts to close the books of the firm.
    Answer: 

    Books of Anup and Sumit

     

    Realisation Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Sundry Debtors

    12,000

    Sundry Creditors

    27,000

    Plants

    47,000

    Loan

    40,000

    Stock

    42,000

    Bank:

    Lease hold land

    60,000

    Lease hold Land

    72,000

    Furniture

    25,000

    Furniture

    22,500

    Bank:

    Stock

    40,500

    Creditors

    25,500

    Plant

    48,000

    Loan

    40,000

    Sundry Debtors

    10,500

    1,93,500

    Expenses

    2500

    68,000

    Profit transferred to

    Anup’s Capital A/c

    3,250

    Sumit’s Capital A/c

    3250

    6,500

    2,60,500

    2,60,500

    Partners’ Capital Account

    Dr.

     

    Cr.

    Particulars

    Anup

    Sumit

    Particulars

    Anup

    Sumit

    Bank

    68,250

    68,250

    Balance b/d

    60,000

    60,000

    Reserve Fund

    5,000

    5,000

    Realisation

    3,250

    3,250

    68,250

    68,250

    68,250

    68,250

    Bank Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Balance b/d

    11,000

    Realisation (Expenses and Liabilities)

    68,000

    Realisation (Assets )

    1,93,500

    Anup’s Capital A/c

    68,250

    Sumit’s Capital A/c

    68,250

    2,04,500

    2,04,500

     NOTE: As per the solution, Profit on Realisation is Rs 6,500; however as per the answer given in the book is Rs 46,500. If Loan is not transferred to the Realisation Account and paid directly from Loan Account, then the answer would match with that of the book.


    Q20: Ashu and Harish are partners sharing profit and losses as 3:2. They decided to dissolve the firm on December 31, 2012. Their balance sheet on the above date was:

    Balance Sheet of Ashu and Harish as on December 31, 2012

     

    Liabilities

    Amount

    Rs

    Assets

    Amount

    Rs

    Capitals:

    Building

    80,000

    Ashu

    1,08,000

    Machinery

    70,000

    Harish

    54,000

    1,62,000

    Furniture

    14,000

    Creditors

    88,000

    Stock

    20,000

    Bank overdraft

    50,000

    Investments

    60,000

    Debtors

    48,000

    Cash in hand

    8,000

     

     

    3,00,000

    3,00,000

     

     

     

     

     

    Ashu is to take over the building at Rs 95,000 and Machinery and Furniture is take over by Harish at value of Rs 80,000. Ashu agreed to pay Creditor and Harish agreed to meet Bank overdraft. Stock and Investments are taken by both partner in profit sharing ratio. Debtors realised for Rs 46,000, expenses of Realisation amounted to Rs 3,000. Prepare necessary ledger Account.
    Answer:

     Books of Ashu and Harish

     

    Realisation Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Building

    80,000

    Creditors

    88,000

    Machinery

    70,000

    Bank overdraft

    50,000

    Furniture

    14,000

    Ashu’s Capital A/c (Assets taken)

    1,43,000

    Stock

    20,000

    Harish’s Capital A/c (Assets taken)

    1,12,000

    Investments

    60,000

    Cash  (Debtors)

    46,000

    Debtors

    48,000

    Ashu’s Capital A/c (Creditors)

    88,000

    Harish’s Capital A/c (Bank Overdraft)

    50,000

    Cash (Expenses)

    3,000

    Profit transferred to

    Ashu’s Capital A/c

    3,600

    Harish’s Capital A/c

    2,400

    6,000

    4,39,000

    4,39,000

    Partners’ Capital Account

    Dr.

     

    Cr.

    Particulars

    Ashu

    Harish

    Particulars

    Ashu

    Harish

    Realisation (Assets taken)

    1,43,000

    1,12,000

    Balance b/d

    1,08,000

    54,000

    Cash

    56,600

    Realisation (Liabilities)

    88,000

    50,000

    Realisation (Profit)

    3,600

    2,400

    Cash

    5,600

    1,99,600

    1,12,000

    1,99,600

    1,12,000

    Cash Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Balance b/d

    8,000

    Realisation (Expenses)

    3,000

    Realisation (Debtors)

    46,000

    Ashu’s Capital A/c

    56,600

    Harish’s Capital A/c

    5,600

    59,600

    59,600

     NOTE: As per the solution, the Profit on Realisation is Rs 6,000; however, the answer mentioned in the book is Rs 14,000.

    Working Notes:

    Ashu

    Harish

    Building

    95,000

    Machinery and Furniture

    80,000

    Stock (3:2)

    12,000

    8,000

    Investment (3:2)

    36,000

    24,000

    Rs 1,43,000

    Rs 1,12,000


    Q21:  Sanjay, Tarun and Vineet shared profit in the ratio of 3:2:1. On December 31,2012 their balance sheet was as follows:

    Balance Sheet of Sanjay, Tarun and Vineet as on December 31, 2012

     

    Liabilities

    Amount

    Rs

    Assets

    Amount

    Rs

    Capitals:

    Plant

    90,000

    Sanjay

    1,00,000

    Debtors

    60,000

    Tarun

    1,00,000

    Furniture

    32,000

    Vineet

    70,000

    2,70,000

    Stock

    60,000

    Creditors

    80,000

    Investments

    70,000

    Bills payable

    30,000

    Bills receivable

    36,000

    Cash in hand

    32,000

     

     

    3,80,000

    3,80,000

     

     

     

     

     

     On this date the firm was dissolved. Sanjay was appointed to realise the assets. Sanjay was to receive 6% commission on the sale of assets (except cash) and was to bear all expenses of Realisation.
    Sanjay realised the assets as follows: Plant Rs 72,000, Debtors Rs 54,000, Furniture Rs 18,000, Stock 90% of the book value, Investments Rs 76,000 and Bills receivable Rs 31,000. Expenses of Realisation amounted to Rs 4,500.
    Prepare Realisation Account, Capital Accounts and Cash Account

    Books of Sanjay, Tarun and Vineet

     

    Realisation Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Plant

    90,000

    Creditors

    80,000

    Debtors

    60,000

    Bills Payable

    30,000

    Furniture

    32,000

    Cash:

    Stock

    60,000

    Plant

    72,000

    Investment

    70,000

    Debtors

    54,000

    Bills Receivable

    36,000

    Furniture

    18,000

    Cash :

    Stock

    54,000

    Creditors

    80,000

    Investments

    76,000

    Bills Payable

    30,000

    1,10,000

    Bills Receivable

    31,000

    3,05,000

    Sanjay’s Capital A/c

    18,300

    Loss transferred to

    (6% commission)

    Sanjay’s Capital

    30,650

    Tarun’s Capital A/c

    20,433

    Vineet’s Capital A/c

    10,217

    61,300

    4,76,300

    4,76,300

    Partners’ Capital Account

    Dr.

     

    Cr.

    Particulars

    Sanjay

    Tarun

    Vineet

    Particulars

    Sanjay

    Tarun

    Vineet

    Realisation (Loss)

    30,650

    20,433

    10,217

    Balance b/d

    1,00,000

    1,00,000

    70,000

    Cash

    87,650

    79,567

    59,783

    Realisation (commission)

    18,300

    1,18,300

    1,00,000

    70,000

    1,18,300

    1,00,000

    70,000

    Cash Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Balance b/d

    32,000

    Realisation

    1,10,000

    Realisation

    3,05,000

    Sanjay’s Capital A/c

    87,650

    Tarun’s Capital A/c

    79,567

    Vineet’s Capital A/c

    59,783

    3,37,000

    3,37,000


    Q22:  The following is the Balance Sheet of Gupta and Sharma as on December 31,2012:

    Balance Sheet of Gupta and Sharma as on December 31, 2012

     

    Liabilities

    Amount

    Rs

    Assets

    Amount

    Rs

    Sundry Creditors

    38,000

    Cash at Bank

    12,500

    Mrs.Gupta’s loan

    20,000

    Sundry Debtors

    55,000

    Mrs.Sharma’s loan

    30,000

    Stock

    44,000

    Reserve fund

    6,000

    Bills Receivable

    19,000

    Provision of doubtful debts

    4,000

    Machinery

    52,000

    Capital

    Investment

    38,500

    Gupta

    90,000

    Fixtures

    27,000

    Sharma

    60,000

    1,50,000

     

    2,48,000

    2,48,000

     

     

     

     

     The firm was dissolved on December 31, 2012 and asset realised and settlements of liabilities as follows:
    (a) The Realisation of the assets were as follows:

    Rs

    Sundry Debtors

    52,000

    Stock

    42,000

    Bills receivable

    16,000

    Machinery

    49,000

    (b) Investment was taken over by Gupta at agreed value of Rs 36,000 and agreed to pay of Mrs. Gupta’s loan.
    (c) The Sundry Creditors were paid off less 3% discount.
    (d) The Realisation expenses incurred amounted to Rs 1,200.
    Journalise the entries to be made on the dissolution and prepare Realisation Account, Bank Account and Partners Capital Accounts.
    Answer

    Books of Gupta and Sharma

     

    Journal

     

     

    Date

    Particulars

    L.F.

    Amount

    Rs

    Amount

    Rs

    2012

     

     

     

     

    Dec. 31

    Realisation A/c

    Dr.

     

    2,35,500

     

     

    To Sundry Debtors A/c

     

     

     

    55,000

     

    To Stock A/c

     

     

     

    44,000

     

    To Bills Receivable A/c

     

     

     

    19,000

     

    To Machinery A/c

     

     

     

    52,000

     

    To Investment A/c

     

     

     

    38,500

     

    To Fixtures A/c

     

     

     

    27,000

     

    (Assets transferred to Realisation Account)

     

     

     

     

     

     

     

     

     

     

    Dec. 31

    Sundry Creditors A/c

    Dr.

     

    38,000

     

     

    Mrs. Gupta’s Loan A/c

    Dr.

     

    20,000

     

     

    Mrs. Sharma’s Loan A/c

    Dr.

     

    30,000

     

     

    Provision for Doubtful Debts

    Dr.

     

    4,000

     

     

    To Realisation A/c

     

     

     

    92,000

     

    (Liabilities transferred to Realisation Account)

     

     

     

     

     

     

     

     

     

     

    Dec. 31

    Bank A/c

    Dr.

     

    1,59,000

     

     

    To Realisation A/c

     

     

     

    1,59,000

     

    (Assets realised: Sundry Debtors Rs 52,000, Stock Rs 42,000,

    Bills Receivable Rs 16,000, Machinery Rs 49,000)

     

     

     

     

     

     

     

     

     

     

    Dec. 31

    Realisation A/c

    Dr.

     

    20,000

     

     

    To Gupta’s Capital A/c

     

     

     

    20,000

     

    (Gupta took over Mrs. Gupta’s Loan)

     

     

     

     

     

     

     

     

     

     

    Dec. 31

    Gupta’s Capital A/c

    Dr.

     

    36,000

     

     

    To Realisation A/c

     

     

     

    36,000

     

    (Investment taken over by Gupta)

     

     

     

     

     

     

     

     

     

     

     

    Dec. 31

    Realisation A/c

    Dr.

     

    66,860

     

     

    To Bank A/c

     

     

     

    66,860

     

    (Liabilities paid: Mrs. Sharma’s Loan Rs 30,000 and Creditors

    Rs 38,000 paid off less 3% discount)

     

     

     

     

     

     

     

     

     

     

    Dec. 31

    Realisation A/c

    Dr.

     

    1,200

     

     

    To Bank A/c

     

     

     

    1,200

     

    (Realisation expenses paid)

     

     

     

     

     

     

     

     

     

     

     

    Dec. 31

    Gupta’s Capital A/c

    Dr.

     

    18,280

     

     

    Sharma’s Capital A/c

    Dr.

     

    18,280

     

     

    To Realisation A/c

     

     

     

    36,560

     

    (Loss on Realisation transferred to Partners’ capital Account)

     

     

     

     

     

     

     

     

     

     

    Dec. 31

    Reserve Fund A/c

    Dr.

     

    6,000

     

     

    To Gupta’s Capital A/c

     

     

     

    3,000

     

    To Sharma’s Capital A/c

     

     

     

    3,000

     

    (Reserve fund distributed among partners ratio)

     

     

     

     

     

     

     

     

     

     

    Dec. 31

    Gupta’s Capital A/c

    Dr.

     

    58,720

     

     

    Sharma’s Capital A/c

    Dr.

     

    44,720

     

     

    To Bank A/c

     

     

     

    1,03,440

     

    (Final payment made to partners)

     

     

     

     

     

     

     

     

     

     

                   

     

    Realisation Account

     

    Dr.

     

    Cr.

     

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Sundry Debtors

    55,000

    Sundry Creditors

    38,000

    Stock

    44,000

    Mrs. Gupta’s Loan

    20,000

    Bills Receivable

    19,000

    Mrs. Sharma’s Loan

    30,000

    Machinery

    52,000

    Provision for Doubtful Debts

    4,000

    Investment

    38,500

    Bank :

     

    Fixtures

    27,000

    Sundry Debtors

    52,000

     

    Gupta’s Capital A/c (Mrs. Gupta Loan)

    20,000

    Stock

    42,000

     

    Bank A/c:

     

    Bills Receivable

    16,000

     

    Creditors

    36,860

     

    Machinery

    49,000

    1,59,000

    Mrs. Sharma’s Loan

    30,000

     

    Gupta’s Capital A/c (Investment)

    36,000

    Expense

    1,200

    68,060

    Loss transferred to

     

     

     

     

    Gupta’s Capital A/c

    18,280

     

     

     

     

    Sharma’s Capital A/c

    18,280

    36,560

     

     

     

     

     

     

     

    3,23,560

     

    3,23,560

     

     

     

     

     

                       

     

    Partners’ Capital Account

     

    Dr.

     

    Cr.

     

    Particulars

    Gupta

    Sharma

    Particulars

    Gupta

    Sharma

    Realisation (Investment)

    36,000

     

    Balance b/d

    90,000

    60,000

    Realisation (Loss)

    18,280

    18,280

    Realisation (Mrs. Gupta Loan)

    20,000

     

    Bank

    58,720

    44,720

    Reserve Fund

    3,000

    3,000

     

     

     

     

     

     

     

    1,13,000

    63,000

     

    1,13,000

    63,000

     

     

     

     

     

     

                     

     

    Bank Account

     

    Dr.

     

    Cr.

     

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Balance b/d

    12,500

    Realisation 

    68,060

    Realisation (Assets realised)

    1,59,000

    (Payment of expenses and liabilities)

     

     

     

    Gupta’s Capital A/c

    58,720

     

     

    Sharma’s Capital A/c

    44,720

     

     

     

     

     

    1,71,500

     

    1,71,500

     

     

     

     

                 

    NOTE: As per the solution, Loss on Realisation is Rs 36,560 and the total of Bank Account is Rs 1,71,500. However, the answers mentioned in the book are Rs 19,660 and Rs 1,88,500 respectively. 


    Q23: Ashok, Babu and Chetan are in partnership sharing profit in the proportion of 1/2, 1/3, 1/6 respectively. They dissolve the partnership of the December 31, 2012, when the balance sheet of the firm as under:

    Balance Sheet of Ashok, Babu and Chetan as on December 31, 2012

     

    Liabilities

    Amount

    Rs

    Assets

    Amount

    Rs

    Sundry Creditors

    20,000

    Bank

    7,500

    Bills payable

    25,500

    Sundry Debtors

    58,000

    Babu’s loan

    30,000

    Stock

    39,500

    Capital’s:

    Machinery

    48,000

    Ashok

    70,000

    Investment

    42,000

    Babu

    55,000

    Freehold Property

    50,500

    Chetan

    27,000

    1,52,000

    Current Accounts :

    Ashok

    10,000

    Babu

    5,000

    Chetan

    3,000

    18,000

     

     

    2,45,500

    2,45,500

     

     

     

     

     

     The Machinery was taken over by Babu for Rs 45,000, Ashok took over the Investment for Rs 40,000 and Freehold property took over by Chetan at Rs 55,000. The remaining Assets realised as follows: Sundry Debtors Rs 56,500 and Stock Rs 36,500. Sundry Creditors were settled at discount of 7%. A Office computer, not shown in the books of Accounts realised Rs 9,000. Realisation expenses amounted to Rs 3,000.
    Prepare Realisation Account, Partners Capital Account, Bank Account.

    Answer:

    Realisation Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Sundry Debtors

    58,000

    Sundry Creditors

    20,000

    Stock

    39,500

    Bills Payable

    25,500

    Machinery

    48,000

    Ashok’s Current  A/c (Investment)

    40,000

    Investment

    42,000

    Babu’s Current  A/c (Machinery)

    45,000

    Freehold property

    50,500

    Chetan’s Current A/c

    55,000

    Bank:

    (Free hold property)

    Sundry Creditors

    18,600

    Bank:

    Bills payable

    25,500

    Sundry Debtors

    56,500

    Expenses

    3,000

    47,100

    Stock

    36,500

    Profit Transferred to

    Unrecorded computer

    9,000

    1,02,000

    Ashok’s Current A/c

    1,200

    Babu’s Current A/c

    800

    Chetan’s Current A/c

    400

    2,400

    2,87,500

    2,87,500

    Partners’ Current Account

    Dr.

     

    Cr.

    Particulars

    Ashok

    Babu

    Chetan

    Particulars

    Ashok

    Babu

    Chetan

    Realisation

    40,000

    45,000

    55,000

    Balance b/d

    10,000

    5,000

    3,000

    (Assets taken)

    Realisation  (Profit)

    1,200

    800

    400

    Ashok’s Capital A/c

    28,800

    Babu’s Capital A/c

    39200

    Chetan’s Capital A/c

    51600

    40,000

    45,000

    55,000

    40,000

    45,000

    55,000

    Partners’ Capital Account

    Dr.

     

    Cr.

    Particulars

    Ashok

    Babu

    Chetan

    Particulars

    Ashok

    Babu

    Chetan

    Ashok’s Current

    28,800

    Balance b/d

    70,000

    55,000

    27,000

    Babu’s Current

    39200

    Bank

    24,600

    Chetan’s Current

    51600

    Bank

    41,200

    15,800

    70,000

    55,000

    51,600

    70,000

    55,000

    51,600

     

    Babu’s Loan A/c

    Dr.

    Cr.

    Particulars

    Amount

    Particulars

    Amount

    Cash A/c

    30,000

    Balance b/d

    30,000

    30,000

    30,000

     

    Bank Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Balance b/d

    7,500

    Realisation  (Payment of Expenses

    47,100

    Realisation  (Assets realised )

    102,000

    and Liabilities)

    Chetan’s Capital A/c

    24,600

    Babu’s Loan

    30,000

    Ashok’s Capital A/c

    41,200

    Babu’s Capital A/c

    15,800

    1,34,100

    1,34,100

     Note: As per the solution, profit on realisation is Rs 2,400. However, the answer provided in the book is Rs 1,200


     

    Q24:  The following is the Balance sheet of Tanu and Manu, who shares profit and losses in the ratio of 5:3, On December 31,2012:

     

    Balance Sheet of Tanu and Manu as on December 31, 2012

     

     

    Liabilities

    Amount

    Rs

    Assets

    Amount

    Rs

    Sundry Creditors

     

    62,000

    Cash at Bank

    16,000

    Bills Payable

     

    32,000

    Sundry Debtors

    55,000

    Bank Loan

     

    50,000

    Stock

    75,000

    Reserve fund

     

    16,000

    Motor car

    90,000

    Capital:

     

     

    Machinery

    45,000

    Tanu

    1,10,000

     

    Investment

    70,000

    Manu

    90,000

    2,00,000

    Fixtures

    9,000

     

     

    3,60,000

     

    3,60,000

     

     

     

     

     

               

     On the above date the firm is dissolved and the following agreement was made: Tanu agree to pay the bank loan and took away the sundry debtors. Sundry creditors accepts stock and paid Rs 10,000 to the firm. Machinery is taken over by Manu for Rs 40,000 and agreed to pay of bills payable at a discount of 5%.. Motor car was taken over by Tanu for Rs 60,000. Investment realised Rs 76,000 and fixtures Rs 4,000. The expenses of dissolution amounted to Rs 2,200.
    Prepare Realisation Account, Bank Account and Partners Capital Accounts.
    Answer:

     Books of Tanu and Manu

     

    Realisation Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Sundry Debtors

    55,000

    Sundry Creditors

    62,000

    Stock

    75,000

    Bills Payable

    32,000

    Motor Car

    90,000

    Bank Loan

    50,000

    Machinery

    45,000

    Tanu’s Capital A/c:

    Investment

    70,000

    Sundry Debtors

    55,000

    Fixtures

    9,000

    Motor Car

    60,000

    1,15,000

    Manu’s Capital A/c  (Bills Payable)

    30,400

    Bank:

    Bank  (Expenses)

    2,200

    Stock

    10,000

    Tanu’s Capital A/c (Bank Loan)

    50000

    Investment

    76,000

    Fixtures

    4,000

    90,000

    Manu’s Capital (Machinery)

    40,000

    Loss transferred to

    Manu’s Capital A/c

    23,500

    Manu’s Capital A/c

    14,100

    37,600

    4,26,600

    4,26,600

    Partners’ Capital Account

    Dr.

     

    Cr.

    Particulars

    Tanu

    Manu

    Particulars

    Tanu

    Manu

    Realisation (Assets taken)

    1,15,000

    40,000

    Balance b/d

    1,10,000

    90,000

    Realisation  (Loss)

    23,500

    14,100

    Realisation  (Liabilities)

    50,000

    30,400

    Bank

    31,500

    72,300

    Reserve Fund

    10,000

    6,000

    1,70,000

    1,26,400

    1,70,000

    1,26,400

    Bank Account

    Dr.

     

    Cr.

    Particulars

    Amount

    Rs

    Particulars

    Amount

    Rs

    Balance b/d

    16,000

    Realisation (Expenses)

    2,200

    Realisation (Assets)

    90,000

    Tanu’s Capital A/c

    31,500

    Manu’s Capital A/c

    72,300

    1,06,000

    1,06,000

     


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    Class 12 Accountancy Chapter Solutions

    Company Accounts and Analysis of Financial Statements

      • Chapter 1 - Accounting for Share Capital
      • Chapter 2 - Issue and Redemption of Debentures
      • Chapter 3 - Financial Statements of a Company
      • Chapter 4 - Analysis of Financial Statements
      • Chapter 5 - Accounting Ratios
      • Chapter 6 - Cash Flow Statement

    Partnership Accounts Solutions

      • Chapter 1 - Accounting for Partnership : Basic Concepts
      • Chapter 2 - Reconstitution of a Partnership Firm - Admission of a Partner
      • Chapter 3 - Reconstitution of a Partnership Firm - Retirement/Death of a partner
      • Chapter 4 - Dissolution of Partnership Firm
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