Unit 4: Dissolution of Partnership Firm

Q11Written answer

Rose and Lily shared profits in the ratio of 2:3. Their Balance Sheet on March 31, 2017 was as follows:

Balance Sheet of Rose and Lily as on March 31, 2017
Liabilities	Amount ₹	Assets		Amount ₹
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 ₹ 4, 84,000. Creditors agreed to take ₹ 38,000. Cost of Realisation was ₹ 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 ₹ 10,000. There was a contingent liability in respect of outstanding electric bill of ₹ 5,000, Bill Receivable taken over by Rose at ₹ 33,000.

Show Realisation Account, Partners Capital Account, Loan Account and Cash Account.

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Books of Rose and Lily Realisation Account
Dr.					Cr.
Particulars		Amount ₹	Particulars		Amount ₹
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 Accounts
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 ₹	Particulars	Amount ₹
Cash	32,000	Balance b/d	32,000

	32,000		32,000

Cash Account
Dr.						Cr.
Particulars		Amount ₹	Particulars		Amount ₹
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: Here the Contingent Liability of Electricity Bill has been treated as Electricity Bill Payable.

Q12Written answer

Shilpa, Meena and Nanda decided to dissolve their partnership on March 31, 2017. Their profit-sharing ratio was 3:2:1 and their Balance Sheet was as under:

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Balance Sheet of Shilpa, Meena and Nanda as on March 31, 2017
Liabilities	Amount ₹	Assets	Amount ₹
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 ₹ 41,660 are taken over by Shiplap for ₹ 35,000 and she agreed to discharge bank loan. The remaining stock was sold at ₹ 14,000 and debtors amounting to ₹ 10,000 realised ₹ 8,000. Land is sold for ₹ 1, 10,000. The remaining debtors realised 50% at their book value. Cost of Realisation amounted to ₹ 1,200. There was a typewriter not recorded in the books worth ₹ 6,000 which were taken over by one of the Creditors at this value. Prepare Realisation Account.

In the books of Shilpa, Meena and Nanda
Realisation Account
Dr.						Cr.
Particulars		Amount ₹	Particulars		Amount ₹
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 ₹	Particulars	Amount ₹
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

Q13Written answer

Surjit and Rahi were sharing profits (losses) in the ratio of 3:2, their Balance Sheet as on March 31, 2017 is as follows:

Balance Sheet of Surjit and Rahi as on March 31, 2017
Liabilities	Amount ₹	Assets	Amount ₹
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, 2017 on the following terms:

1. Surjit agreed to take the investments at ₹ 8,000 and to pay Mrs. Surjit’s loan.

2. Other assets were realised as follows:

Stock	₹	5,000
Debtors	₹	18,500
Furniture	₹	4,500
Plant	₹	25,000

3. Expenses on Realisation amounted to ₹ 1,600.

4. Creditors agreed to accept ₹ 37,000 as a final settlement.

You are required to prepare Realisation Account, Partners’ Capital Account and Bank Account.

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8
Dr.					Cr.
Particulars		Amount ₹	Particulars		Amount ₹
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 ₹	Particulars	Amount ₹
		Balance b/d	5,000
Bank	5,000

	5,000		5,000

Bank Account
Dr.				Cr.
Particulars	Amount ₹	Particulars	Amount ₹
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

Q14Written answer

Rita, Geeta and Ashish were partners in a firm sharing profits/losses in the ratio of 3:2:1. On March 31, 2017 their balance sheet was as follows:

Liabilities		Amount ₹	Assets	Amount ₹
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:

	₹
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 ₹ 4,100,

5. Firm had to pay ₹ 7,200 for outstanding salary not provided for earlier,

6. Contingent liability in respect of bills discounted with the bank was also materialized and paid off ₹ 9,800,

Prepare Realisation Account, Capital Accounts of Partners’ and Cash Account.

In the books of Rita, Geeta and Ashish Realisation Account
Dr.						Cr.
Particulars		Amount ₹	Particulars		Amount ₹
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

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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 ₹	Particulars	Amount ₹
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

Q15Written answer

Anup and Sumit are equal partners in a firm. They decided to dissolve the partnership on December 31, 2017. When the balance sheet is as under:

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Balance Sheet of Anup and Sumit as on December 31, 2017
Liabilities		Amount ₹	Assets	Amount ₹
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:

	₹
Lease hold land	72,000
Furniture	22,500
Stock	40,500
Plant	48,000
Sundry Debtors	10,500

The Creditors were paid ₹ 25,500 in full settlement. Expenses of Realisation amount to ₹ 2,500.

Prepare Realisation Account, Bank Account, and Partners Capital Accounts to close the books of the firm.

Books of Anup and Sumit Realisation Account
Dr.						Cr.
Particulars		Amount ₹	Particulars		Amount ₹
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 ₹	Particulars	Amount ₹
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

Q16Written answer

Ashu and Harish are partners sharing profit and losses as 3:2. They decided to dissolve the firm on December 31, 2017. Their balance sheet on the above date was:

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Balance Sheet of Ashu and Harish as on December 31, 2017
Liabilities		Amount ₹	Assets	Amount ₹
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 ₹ 95,000 and Machinery and Furniture is take over by Harish at value of ₹ 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 ₹ 46,000, expenses of Realisation amounted to ₹ 3,000. Prepare necessary ledger Account.

Books of Ashu and Harish Realisation Account
Dr.					Cr.
Particulars		Amount ₹	Particulars	Amount ₹
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 ₹	Particulars	Amount ₹
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

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
	₹ 1,43,000	₹ 1,12,000

Q17Written answer

Sanjay, Tarun and Vineet shared profit in the ratio of 3:2:1. On December 31, 2017 their balance sheet was as follows:

Balance Sheet of Sanjay, Tarun and Vineet as on December 31, 2017
Liabilities		Amount ₹	Assets	Amount ₹
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 ₹ 72,000, Debtors ₹ 54,000, Furniture ₹ 18,000, Stock 90% of the book value, Investments ₹ 76,000 and Bills receivable ₹ 31,000. Expenses of Realisation amounted to ₹ 4,500.

Prepare Realisation Account, Capital Accounts and Cash Account

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Books of Sanjay, Tarun and Vineet Realisation Account
Dr.						Cr.
Particulars		Amount ₹	Particulars		Amount ₹
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 ₹	Particulars	Amount ₹
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

Q18Written answer

The following is the Balance Sheet of Gupta and Sharma as on December 31, 2017:

Balance Sheet of Gupta and Sharma as on December 31, 2017
Liabilities		Amount ₹	Assets	Amount ₹
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, 2017 and asset realised and settlements of liabilities as follows:

(a) The Realisation of the assets were as follows:

	₹
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 ₹ 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 ₹ 1,200.

Journalise the entries to be made on the dissolution and prepare Realisation Account, Bank Account and Partners Capital Accounts.

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Books of Gupta and Sharma Journal
Date	Particulars		L.F.	Amount ₹	Amount ₹
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 ₹ 52,000, Stock ₹ 42,000, Bills Receivable ₹ 16,000, Machinery ₹ 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 ₹ 30,000 and Creditors ₹ 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 ₹	Particulars		Amount ₹
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 ₹	Particulars	Amount ₹
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

Q19Written answer

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, 2017, when the balance sheet of the firm as under:

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Worked solution

Balance Sheet of Ashok, Babu and Chetan as on December 31, 2017
Liabilities		Amount ₹	Assets	Amount ₹
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 ₹ 45,000, Ashok took over the Investment for ₹ 40,000 and Freehold property was taken over by Chetan at ₹ 55,000. The remaining Assets realised as follows: Sundry Debtors ₹ 56,500 and Stock ₹ 36,500. Sundry Creditors were settled at discount of 7%. A Office computer, not shown in the books of Accounts realised ₹ 9,000. Realisation expenses amounted to ₹ 3,000.

Prepare Realisation Account, Partners Capital Account, and Bank Account.

Realisation Account
Dr.						Cr.
Particulars		Amount ₹	Particulars		Amount ₹
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 Accounts
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 Accounts
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 ₹	Particulars	Amount ₹
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

Q20Written answer

The following is the Balance sheet of Tanu and Manu, who shares profit and losses in the ratio of 5:3, On December 31, 2017:

Balance Sheet of Tanu and Manu as on December 31, 2017
Liabilities		Amount ₹	Assets	Amount ₹
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 ₹ 10,000 to the firm. Machinery is taken over by Manu for ₹ 40,000 and agreed to pay of bills payable at a discount of 5%.. Motor car was taken over by Tanu for ₹ 60,000. Investment realised ₹ 76,000 and fixtures ₹ 4,000. The expenses of dissolution amounted to ₹ 2,200.

Prepare Realisation Account, Bank Account and Partners Capital Accounts.

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Worked solution

Books of Tanu and Manu Realisation Account
Dr.					Cr.
Particulars	Amount ₹	Particulars		Amount ₹
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 ₹	Particulars	Amount ₹
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

Concepts covered in this chapter –

Dissolution of partnership
Dissolution of a firm
Settlement of Accounts
Accounting treatment

Conclusion

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Numerical Questions for NCERT Accountancy Solutions Class 12 Part 1 Chapter 5