Advertisements
Advertisements
Question
Gautam, Viral and Ashwin were Partners sharing profits and losses equally. Their Balance sheet as on 31st December, 2011 was as follows:
Balance Sheet as on 31st December, 2011
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
| Capital Accounts: | Building | 73,900 | |
| Gautam | 75000 | Furniture | 44,100 |
| Virat | 45000 | Stock | 25,400 |
| Reserve Fund | 27,000 |
Debtors |
33,600 |
| Creditors | 48,500 | Cash | 15,000 |
| Bank Loan | 11,500 | Ashwin’s Capital | 15,000 |
| 207000 | 207000 |
The firm was dissolved due to insolvency of Ashwin and the following was the result.
(i) The realisation of Assets were as follows:
a) The stock was completely damaged and could realise worth Rs 16,500 only.
b) Building was sold for Rs 49,800.
c) Furniture was realised by the firm at Rs 23,100 less than the book value.
d) A Customer who owes Rs 14,400 became insolvent and nothing could be recovered from his private estate.
(ii) Creditors were paid for Rs 36,900 in full settlement and Bank Loan was discharged fully.
(iii) The expenses of realisation Rs 4,100
(iv) Ashwin became insolvent and the firm could recover only Rs 4,000 from his private estate.
Prepare Realisation A/c, Partner’s Capital A/c and cash A/c to close the books of the firm.
Solution
Realisation Account
Dr. Cr.
| Particulars | Amount (Rs) | Particulars | Amount (Rs) | ||
| Sundry Assets: | Sundry Liabilities: | ||||
| Building | 73,900 | 177000 | Creditors | 48500 | 60000 |
| Furniture | 44,100 | Bank Loan | 11500 | ||
| Stock | 25,400 | Bank A/c : | |||
| Debtors | 33,600 | Stock | 16500 | 106500 | |
| Bank A/c : | Building | 49800 | |||
| Creditors | 36900 | 52500 | Furniture | 21000 | |
| Bank loan | 11500 | Debtors | 19200 | ||
| Realisation Expenses | 4100 | Loss transferred to: | |||
| Gautam’s Capital A/c | 21000 | 63000 | |||
| Virat’s Capital A/c | 21000 | ||||
| Ashwin’s Capital A/c | 21000 | ||||
| 229500 | 229500 | ||||
Partners’ Capital Accounts
Dr. Cr.
| Particulars | Gautam | Virat | Ashwin | Particulars | Gautam | Virat | Ashwin |
| Balance b/d | 15000 | Balanace b/d | 75000 | 45000 | |||
| Realisation A/c (Loss) | 21000 | 21000 | 21000 | Reserve fund | 9000 | 9000 | 9000 |
| Ashwin’s Capital A/c | 11500 | 11500 | Cash | 4000 | |||
| Bank A/c | 51500 | 51500 | Gautam’s Capital A/c | 11500 | |||
| Virat’s Capital A/c | 11500 | ||||||
| 84000 | 54000 | 36000 | 84000 | 54000 | 36000 |
Cash/Bank Account
Dr. Cr.
| Particulars | Amount (Rs) | Particulars | Amount (Rs) | |
| Balance b/d | 15000 | Realisation A/c (Liabilities) | 52500 | |
| Realisation A/c (Assets) | 106500 | Capital A/cs | ||
| Ashwin’s Capital A/c | 4000 | Gautam | 51500 | 73000 |
| Virat | 21500 | |||
| 125500 | 125500 | |||
Working Notes:
Calculation of Capital Deficiency
Capital Deficiency of Ashwin of Rs 23000 brought in by Gautam and Virat in their Profit Sharing Ratio
Gautam will bring `= 23000 xx 1/2 = 11500`
Virat will bring`= 23000 xx 1/2 = 11500`
APPEARS IN
RELATED QUESTIONS
Dissolution expenses are credited to ______.
Mr. Aaba and Mr. Baba are equal partners whose Balance Sheet as on 31 st March, 2012 was as under:
Balance Sheet as on
31st March, 2012
| Liabilities | Amount(Rs.) | Assets | Amount(Rs.) |
| Sundry Creditors | 16000 | Cash in hand | 500 |
|
Capital A/c Aaba Baba |
2000 2000 |
Stock | 4500 |
| Debtors | 4000 | ||
| Plant and machinery | 5000 | ||
| Furniture | 2000 | ||
| Land and Building | 4000 | ||
| 20000 | 20000 |
Due to weak financial position of the partners the firm is dissolved.
Aaba and Baba are not able to contribute anything from their private estate, hence they are declared insolvent.
The assets are realised as follows :-
Stock Rs. 3,000, Plant and Machinery Rs. 3,000, Furniture Rs. 1,000, Land and Building Rs. 2,000 and Debtors Rs. 1,000 only.
Realisation expenses amounted to Rs. 500.
You are required to prepare necessary Ledger Accounts to close the books of the firm.
An account opened to find out the profit or loss on sale of assets and settlement of liabilities.
Distinguish between 'Dissolution of partnership' and 'Dissolution of partnership firm' on the basis of court's intervention.
L and M were partners in a firm sharing profits in the ratio of 2:3. On 28-2-2016 the firm was dissolved. After transferring assets (other than cash) and outsiders' liabilities to realization account you are given the following information :
(a) A creditor for Rs.1,40,000 accepted building valued at Rs.1, 80,000 and paid to the firm Rs.40,000.
(b) A second creditor for Rs.30,000 accepted machinery valued at Rs.28,000 in full settlement of his claim.
(c) A third creditor amounting to Rs.70,000 accepted Rs.30,000 in cash and investments of the book value of Rs.45,000 in full settlement of his claim.
(d) Loss on dissolution was Rs.4,000.
Pass necessary journal entries for the above transactions in the books of the firm assuming that all payments were made by cheque.
Distinguish between ‘Dissolution of partnership’ and Dissolution of partnership firm ‘on the basis of closure of Books.
E and F were partners in a firm sharing profits in the ratio of 7:3. On 28-2-2016 the firm was dissolved. After transferring assets (other than cash) and outsider's liabilities to realization account you are given the following information:
(a) A creditor for Rs 3, 00,000 accepted building valued Rs 3, 75,000 and paid the firm Rs 75,000.
(b) A second creditor for Rs 93,000 accepted stock valued at Rs 90,000 in full settlement of his claim.
(c) A third creditor amounting to Rs 60,000 accepted Rs 37,000 in cash and investments of the book value of Rs 40,000 in full settlement of his claim.
(d) Loss on dissolution was Rs 7,000.
Pass necessary journal entries for the above transactions in the books of the firm assuming that all payments were made by cheque.
Pass necessary journal entries on the dissolution of a partnership firm in the following cases :
1) Expenses of dissolution were Rs 9,000.
2) Expenses of dissolution Rs 3,400 were paid by a partner, Vishal
3) Shiv, a partner, agreed to do the work for dissolution for a commission of Rs 4,500. He also agreed to bear the dissolution expenses. Actual dissolution expenses Rs 3,900 were paid from the firm's bank account.
4) Naveen, a partner, agreed to look after the dissolution work for which he was allowed a remuneration of Rs 3,000. Naveen also agreed to bear the dissolution expenses. Actual expenses on dissolution Rs 2,700 were paid by Naveen.
5) Vivek, a partner, was appointed to look after the dissolution work for a remuneration of Rs 7,000. He agreed to bear the dissolution expenses. Actual dissolution expenses Rs 6,500 were paid by Rishi, another partner, on behalf of Vivek.
6) Gaurav, a partner, was appointed to look after the work of dissolution for a commission of Rs 12,500. He agreed to bear the dissolution expenses. Gaurav took over furniture of Rs 12,500 as his commission. The furniture had already been transferred to realisation account.
Prachi, Ritika and Ishita were partners in a firm sharing profits and losses in the ratio of 5 : 3: 2. In spite of repeated reminders by the authorities, they kept dumping hazardous material into a nearby river. The court ordered for the dissolution of their partnership firm on 31st March 2012. Prachi was deputed to realise the assets and pay the liabilities. She was aid Rs 1,000 as the commission for her services. The financial position of the firm was as follows:
| Liabilities | Rs | Assets | Rs |
|
Creditors Investment Fluctuation Fund Capitals Prachi Ritika |
2,00,000 30,000 30,000 40,000 |
Furniture Stock Investments Cash Ishita's Capital
|
37,000 5,500 15,000 9,000 18,000
|
| 84,500 | 84,500 |
Assets and liabilities are transferred to Realisation Account at their ______ value.
Moli, Bhola and Raj were partners in a firm sharing profits and losses in the ratio of 3 : 3 : 4. Their partnership deed provided for the following :
(i) Interest on capital @ 5% p.a.
(ii) Interest on drawing @ 12% p.a.
(iii) Interest on partners' loan @ 6% p.a.
(iv) Moli was allowed an annual salary of Rs 4,000; Bhola was allowed a commission of 10% of net profit as shown by Profit and Loss Account and Raj was guaranteed a profit of Rs 1,50,000 after making all the adjustments as provided in the partnership agreement.
Their fixed capitals were Moli : Rs 5,00,000; Bhola : Rs 8,00,000 and Raj : Rs 4,00,000. On 1st April, 2016 Bhola extended a loan of Rs 1,00,000 to the firm. The net profit of the firm for the year ended 31st March, 2017 before interest on Bhola's loan was Rs 3,06,000.
Prepare Profit and Loss Appropriation Account of Moli, Bhola and Raj for the year ended 31st March, 2017 and their Current Accounts assuming that Bhola withdrew Rs 5,000 at the end of each month, Moli withdrew Rs 10,000 at the end of each quarter and Raj withdrew Rs 40,000 at the end of each half year.
If any unrecorded liability is paid on dissolution of the firm ___________ is debited.
Answer in one sentence only.
What is a capital deficiency?
Answer in one sentence only.
When is Realisation Account opened?
Answer in one sentence only.
In what proportion is the balance on Realisation Account transferred to Partners’ Capital / Current Accounts?
Answer in one sentence only.
Who should bear the capital deficiency of an insolvent partner?
Answer in one Sentence only.
Why is Realisation Account opened?
Write the word / term / phrase, which can substitute the following statement.
Conversion of assets into cash on dissolution of firm.
Give the word/term/phrase which can substitute the following statement.
The account which shows realisation of assets and discharge of liabilities.
State whether the following statement is True or False with reason.
The insolvency loss at the time of dissolution of the firm is shared by the solvent partners in their profit sharing ratio.
State whether the following statement is True or False with reason.
Realisation Loss is not transferred to the insolvent partner’s capital account.
In case of dissolution assets and liabilities are transferred to ______ A/c.
Select the most appropriate alternative from those given below :
Realisation Account is __________on realisation of assets.
Ganesh and Chandan were partners sharing profits and losses in the proportion of 3:2. They dissolve the partnership firm on 31st March, 2011 when their position was as follows:
Balance Sheet as on 31st March, 2011
| Liabilities | Amount (Rs) |
Assets | Amount (Rs) | |
| Sundry Creditors | 25000 | Debtors | 112500 | 100000 |
| Bank overdraft | 20000 | Less : R.D.D | 12500 | |
| Reserve Fund | 30000 | Stock | 225000 | |
| Capital Accounts: | Furniture | 50000 | ||
| Ganesh | 230000 | Motor Car | 75000 | |
| Chandan | 150000 | Cash in hand | 5000 | |
| 455000 | 455000 | |||
The Assets realised as follows: Debtors Rs 90,000, Stock Rs 2,00,000, and Goodwill Rs 25,000, Motor Car was taken over by Ganesh for Rs 70,000 and Furniture by Chandan for Rs 60,000.
The Creditors were paid Rs 22,500 in full settlement. The expenses of realisation amounted to Rs 10,000.
Pass necessary journal entries in the books of the firm.
Pannalal, Babulal and Hiralal were partners sharing profits and losses in the proportion of 2:2:1, following is their Balance Sheet as on 31st March, 2008.
Balance Sheet as on 31st March, 2008
| Liabilities | Amount (Rs) | Assets | Amount (Rs) | |
| Capital Accounts: | Machinery | 25000 | ||
| Pannalal | 30000 | Stock | 10000 | |
| Babulal | 10000 | Debtors | 27500 | 26000 |
| Hiralal | 10000 | Less : R.D.D | 1500 | |
| General Reserve | 3000 |
Investment |
12000 | |
| Creditors | 20000 | Profit and Loss A/c | 9000 | |
| Pannalal’s Loan A/c | 4000 | Bank | 2000 | |
| Bills payable | 7000 | |||
| 84000 | 84000 | |||
On the above date the partners decided to dissolve the firm:
1) Assets were realised: Machinery Rs 22,500, Stock Rs 9,000, Investment Rs 10,500, Debtors Rs 22,500.
2) Dissolution expenses were Rs 1,500.
3) Goodwill of the firm realised Rs 12,000
Pass the necessary Journal entries in the books of the firm.
Mahesh, Suresh and Jayesh were partners of the firm. They decided to dissolve the firm on 31st March, 2012. Their Balance Sheet as on that date was as under:
Balance Sheet as on 31st March, 2012
| Liabilities | Amount (Rs) | Assets | Amount (Rs) | |
| Creditors | 18000 | Cash at Bank | 9600 | |
| Loan | 4500 | Sundry Assets | 51000 | |
| Capitals | Debtors | 72600 | 69000 | |
| Mahesh | 82500 | Less : R.D.D. | 3600 | |
| Suresh | 30000 | Stock | 23400 | |
| Jayesh | 21000 | Furniture | 3000 | |
| 156000 | 156000 | |||
The firm was dissolved as follows:
1) Mahesh will accept furniture for Rs 2,000 and agreed accept the debtors of book value of Rs 60,000 at on agreed value of Rs 51,000.
2) Suresh will accept stock at an agreed value Rs 20,000, and Sundry Assets of Book value Rs 24,000 at Rs 23,500.
3) Jayesh will accept remaining Sundry Assets for Rs 25,000 He will further accept the liability of loan along with due interest at 12% p.a.
Interest for three months on this loan was outstanding and was not recorded in the books.
4) Expenses of dissolution were Rs 1,000 and outstanding expenses of Rs 1,200 were to be paid from the firm.
5) The remaining debtors were realised Rs 7,000.
Prepare:
1) Realisation A/c
2) Partner’s Capital A/c
3) Bank A/c
Ganga, Yamuna and Godavari are in Partnership sharing profits and losses equally. Their Balance sheet as on 31st December, 2011 was as follows:
Balance Sheet as on 31st December, 2011
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
| Capital Accounts | Currnet Accounts | ||
| Ganga | 25000 | Yamuna | 20000 |
| Yamuna | 10000 | Godavari | 4000 |
| Godavari | 5000 | Premises | 17200 |
| Ganga’s Currnet A/c | 3000 | Machinery | 10800 |
| Sundry Creditors | 4000 | Debtors | 9600 |
| Bank loan | 3000 | Cash | 6400 |
| 50000 | 50000 |
Godavari was declared insolvent and hence the firm was dissolved as on that date. Premises was sold at Rs 14,800, Machinery realised Rs 6,400. Bad debts and discount allowed to Debtors amounted to Rs 1,600. Sundry creditors agreed to receive 80 paise in a rupee (Rs) in full satisfaction of their claim. Bank Loan was settled at 60% of book value. During the course of dissolution a liability under an action for damages was settled for Rs 1,400 against Rs 2,100 provided in the books of the firm. The expenses of realisation amounted to Rs 900. Goodwill contributed Rs 1,900 from her private Property.
Prepare necessary ledger accounts in the books of the firm.
State the difference between dissolution of partnership and dissolution of partnership firm.
Land and Building (book value) ₹ 1,60,000 sold for ₹ 3,00,000 through a broker who charged 2% commission on the deal. Journalise the transaction, at the time of dissolution of the firm.
Following is the balance sheet as on 31 st march 2016 of M/s . Jay and Ajay :
Balance sheet as on 31st MArch 2016
| Liabilities | Amount | Assets | Assets | |
| Capital A/cs : | Cash at bank | 18000 | ||
| Jay | 150000 | Stock | 75000 | |
| Ajay | 150000 | Furniture | 90000 | |
| Reserve fund | 30000 | Investment | 30000 | |
| Loan from Jay | 3000 | Machinery | 90000 | |
| Bills payable | 6000 | Buildings | 45000 | |
| Creditors | 30000 | Debtors | 24000 | 21000 |
| Less : R.D.D | 3000 | |||
| 369000 | 369000 | |||
The firm was dissolved on 31st March , 2016 and the assets realised were as under :
(1) Jay look over the investment at ₹ 27600 and Ajay took over the furniture at ₹ 84000.
(2) The assets were realised as follows :
Stock 73500 ;
Debtors 22500 ;
Machinery 84000 ;
Building 42000
(3) The creditors were paid off at a discount of 900 and other liabilities were paid in full.
(4) Dissolution expenses were 4200
(5) Jay and Ajay were sharing profits and losses in the ratio of 3 : 2.
Prepare :
1) Realisation Account
2) Capital Account of all partners
3) Bank Account
Rahul, Rohit and Ramesh were partners in a firm sharing profits and losses in the ratio of 2:2:1 respectively. The Balance Sheet as on 31.03.2013 was as follows :
Balance Sheet as on 31st Mar, 2013
| Liabilities |
Amount
(Rs.)
|
Assets |
Amount
(Rs.)
|
Amount
(Rs.)
|
| Sundry Creditors | 20,000 | Cash at Bank | 8000 | |
| Bills Payable | 5,000 |
Debtors
|
16000 | |
| General Reserve | 6,000 | Less : R.D.D. | (1000) | 15,000 |
| Rahul’s Loan A/c | 16,000 | Stock | 20,000 | |
| Capital Account | Plant and Machinery | 30,000 | ||
| Rahul | 25,000 | Furniture | 6,000 | |
| Rohit | 10,000 | Ramesh’s Capital Account | 3,000 | |
| 82000 | 82000 |
Realisation account is __________ on realisation of assets.
Give the word/term/phrase which can substitute the following statement.
Debit balance of Realisation account.
Write the word/phrase/term/ which can substitute the following statement.
Expenses incurred on dissolution of firm.
State whether the following statement is True or False with reason.
A solvent partner having debit balance to his Capital Account does not share the deficiency of insolvent partner Capital Account.
State whether the following statement is True or False with reason.
At the time of the dissolution of partnership, all assets should be transferred to Realisation Account.
State whether the following statement is True or False with reason.
At the time of dissolution, a loan from the partner will be transferred to Realisation Account.
Creditors ₹ 30,000, Bills Payable ₹ 20,000 and Bank Loan ₹ 10,000. Available Bank Balance ₹ 40,000 what will be the amount that creditors will get in case of all partner's insolvency.
Insolvent Partner Capital A/c debit side total is ₹ 10,000 and the credit side total is ₹ 6,000. Calculate deficiency.
Insolvent partners capital A/c Debit side is ₹ 15,000 & insolvent partner brought cash ₹ 6,000. Calculate the amount of Insolvency Loss to be distributed among the solvent partners.
Shailesh and Shashank were partners sharing Profits and Losses in the ratio of 3:2. Their Balance Sheet as on 31st March 2019 was as follows.
| Balance Sheets as on 31st December 2019. | |||
| Liabilities | Amount ₹ | Assets | Amount ₹ |
| Capital Account : | Building | 7000 | |
| Shailesh | 10,000 | Plant | 9,000 |
| Shashank | 6,000 | Debtors | 14,000 |
| Current Account : | Stock | 5,000 | |
| Shailesh | 3,000 | Bank | 6,000 |
| Shashank | 2,000 | ||
| Creditors | 17,400 | ||
| Bills payable | 2,600 | ||
| 41,000 | 41,000 | ||
The firm was dissolved on the above date and the assets realised as under.
1. Plant ₹ 8,000, Building ₹ 6,000, Stock ₹ 4,000 and Debtors ₹ 12,000.
2. Shailesh agreed to pay of the Bills Payable.
3. Creditors were paid in full.
4. Dissolution expenses were ₹ 1,400
Prepare Realisation A/c, Partners Current A/c, Partners Capital A/c, and Bank A/c
Seeta and Geeta are partners in the firm sharing Profits and Losses in the ratio of 4:1. They decided to dissolve the partnership on 31st March 2020 on which date their Balance Sheet stood as follows.
| Balance Sheets as on 31st March 2020 | ||||
| Liabilities | Amount ₹ | Assets | Amount ₹ | |
| Capital | Furniture | 14,000 | ||
| Seeta | 90,000 | Plant | 65,000 | |
| Geeta | 40,000 | Trademark | 8,000 | |
| Sundry Creditors | 35,000 | Sundry Debtors | 48,000 | |
| Bank Loan | 15,000 | Less - R. D. D | 3,000 | 45,000 |
| Stock | 30,000 | |||
| Cash in hand | 10,000 | |||
| Advertisement Suspense | 8,000 | |||
| 1,80,000 | 1,80,000 | |||
Additional Information :
1. Plant and Stock taken over by Seeta ₹ 78,000, and ₹ 22,000 respectively
2. Debtors Realised 90% of the Book Value and Trademark at ₹ 5,000. and Goodwill was realised for ₹ 7,000.
3. Unrecorded assets estimated ₹4,500 was sold for ₹1,500.
4. ₹ 1,000 Discount were allowed by creditors while paying their claim.
5. The Realisation Expenses amounted to ₹ 3,500
You are required to prepare Realisation A/c, Cash A/c, and Partners Capital A/c
A partnership firm is compulsorily dissolved:
On dissolution of a firm, a liability taken over by a partner is credited to ______.
Pick the odd one out: (In reference to Dissolution partnership firm)
In the event of dissolution of the firm, the partner's assets are first used for payment of the following:
At the time of dissolution, all assets are transferred to Realisation Account at their ______.
Complete the table.
| Creditors | Bills Payable | Third-Party Liabilities |
| ₹ 16,000 | ₹ 12,000 | ? |
Total assets of a partnership firm, which was dissolved were ₹ 30,00,000 and its total liabilities were ₹ 6,00,000. Assets were realised at 80% and liabilities were settled at 5% less. If dissolution expenses were ₹ 30,000 the profit or loss on dissolution was ______.
Pass the necessary journal entries for the following transactions on the dissolution of the partnership firm of Tanay and Mehak after various assets (other than cash) and external liabilities have been transferred to Realisation Account:
- Creditors of ₹ 60,000 accepted stock valued at ₹ 59,000 in full settlement of their claim.
- Tanay agreed to pay off his wife's loan of ₹ 12,000.
- The firm had a debit balance of ₹ 18,000 in the profit and loss account on the date of dissolution.
- An unrecorded liability of ₹ 20,000 was paid by partner, Mehak, at a discount of 10%.
- Tanay's loan of ₹ 4,000 was paid through a cheque.
- Expenses on dissolution amounted to ₹ 11,000 which were paid by Mehak.
Insolvent partner Capital A/c debit side total is ₹ 25,000 and credit side total is ₹ 10,000. Calculate deficiency.
______ means winding-up of partnership firm.
Lal, Bal and Pal were partners sharing profits and losses in the ratio of 2 : 2 : 1. The following is the Balance Sheet as on 31st March, 2020.
| Balance sheet as on 31st March 2020 | ||||
| Liabilities | Amount (₹) | Assets | Amount (₹) | |
| Capital A/c | Machinery | 50,000 | ||
| Lal | 60,000 | Investments | 24,000 | |
| Bal | 20,000 | Debtors | 55,000 | 52,000 |
| Pal | 20,000 | Less: R.D.D. | (3,000) | |
| General Reserve | 6,000 | Stock | 20,000 | |
| Creditors | 48,000 | Profit and loss A/c | 18,000 | |
| Bills Payable | 14,000 | Bank | 4,000 | |
| 168000 | 168000 | |||
On the above date the partners decided to dissolve the firm.
(1) Assets were realised as:
| Machinery | ₹ 45000 |
| Stock | ₹ 18000 |
| Investment | ₹ 21000 |
| Debtors | ₹ 45000 |
(2) Dissolution expenses were ₹ 3000.
(3) Goodwill of the firm realised ₹ 24000.
Prepare:
- Realisation Account
- Partner's Capital Account
- Bank Account.
Choose the correct order in which a partnership firm, at the time of its dissolution, will apply the amount realised from the sale of its assets, including any amount contributed by the partners, towards the payment of:
P: Partners' loan
Q: Firm's debts
R: Balance of partners' capital
S: Surplus divided amongst the partners in their profit-sharing ratio
Mention the liability of a partnership firm which is not shown in its Balance Sheet, but is paid off at the time of the dissolution of the firm.
