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Question
Kumar and Gaurav were partners in the firm in a sharing profit in the ratio of their capitals. On 31st March 2013 their Balance Sheet was as follows:
| Balance Sheet of Kumar and Gaurav as on 31st March 2013 | |||
| Liabilities |
Amount Rs |
Assets |
Amount Rs |
|
Creditors Workman Compensation Fund Satya’s Current Account Capital’s: Kumar 1,50,000 Gaurav 1,00,000 |
80,000 25,000 24,000
2,50,000 |
Bank Debtors Stock Machinery Shanti’s Current Account
|
79,000 1,70,000 34,000 79,000 17,000
|
|
|
3,79,000 |
3,79,000 | |
On the above date the firm was dissolved:
1. Kumar took over 50% of stock at 10% less than its book value. The remaining stock was sold for Rs 10,000.
2. Debtors were realized at a discount of 5%.
3. An unrecorded asset was sold for Rs 9,000 and machinery was sold for Rs 18,000.
4. Creditors were paid in full.
5. There was an outstanding bill for repairs for amounting to Rs 14,000 which was settled at Rs 12,000.
Prepare Realisation Account
Solution
| Realisation Account | |||
| Dr. | Cr. | ||
| Particulars | Rs | Particulars | Rs |
|
To Sundry Asset: Debtors 1,70,000 Stock 34,000 Machinery 79,000
To Cash A/c (Liabilities) Creditors 80,000 Outstanding Bill 12,000
|
2,83,000
92,000
|
By Creditors A/c By Shanti’s Current A/c (stock) By Cash A/c (Assets Realised) Stock 10,000 Unrecorded Investment 9,000 Machinery 18,000 Debtors 1,61,500
By Realisation Loss trfd Kumar’s Current A/c 48,720 Gaurav’s Current A/c 32,480 |
80,000 15,300
1,98,500
81,200 |
|
|
3,75,000 |
|
3,75,000 |
Note: In this case, the partners share profit in the ratio of their capitals i.e. 3:2.
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RELATED QUESTIONS
Chopra, Shah and Patel were partners sharing profits in the ratio of 3:2:1. On 31.3.2014 their firm was dissolved. The assets were realized and liabilities were paid off. The accountant prepared Realisation Account, Partner's Capital Accounts and Cash Account but forgot to post few amounts in these accounts.
You are required to complete the below give accounts by posting correct amounts
| Realisation Account | |||
| Dr. | Cr. | ||
| Particulars |
Amount Rs |
Particulars |
Amount Rs |
| To Plant and Machinery | 1,60,000 | By Sundry Creditors | 1,50,000 |
| To Stock | 1,50,000 | By Mrs. Chopra Loan | 1,30,000 |
| To Sundry Debtors | 2,00,000 | By Repairs and Renewals Reserve | 12,000 |
| To Prepaid Insurance | 4,000 | By Provision for Bad debts | 10,000 |
| To Investment | 30,000 | By Cash A/c – (Assets sold) | |
| To Chopra’s Capital A/c (Mrs. Chopra’s Loan) |
1,30,000 | Plant 1,20,000 | |
| To Cash A/c (Dishonored Bill) | 50,000 | Stock 1,20,000 | |
| To Cash (Creditors) | 1,50,000 | Debtors 1,60,000 | 3,80,000 |
| To Cash (Expenses) | 8,000 | By Chopra’s Capital A/c (Investment) |
20,000 |
| ----------------- | ------- | ||
| 8,82,000 | 8,82,000 | ||
| Capital Account | |||||||
| Dr. | Cr. | ||||||
| Particulars |
Chopra Rs |
Shah Rs |
Patel Rs |
Particulars |
Chopra Rs |
Shah Rs |
Patel Rs |
| To Realisation | 20,000 | ----- | ------ | By bal b/d | |||
| -------- | -------- | -------- | -------- | By Realisation (Loan) |
1,30,000 | ||
| -------- | -------- | -------- | -------- | ------------- | -------- | -------- | -------- |
| 2,30,000 | 1,50,000 | 30,000 | 2,30,000 | 1,50,000 | 30,000 | ||
| Cash Account | |||
| Dr. | Cr. | ||
| Particulars |
Amount Rs |
Particulars |
Amount Rs |
| --------------- | -------- | By Realisation A/c (Dishonored Bill) |
50,000 |
| --------------- | -------- | By Realisation (Sundry Creditors) | 1,50,000 |
| To Patel’s Capital A/c | 10,000 | --------------- | -------- |
| By Chopra’s Capital A/c | 1,20,000 | ||
| By Shah’s Capital A/c | 90,000 | ||
| 4,18,000 | 4,18,000 | ||
Hanif and Jubed were partners in a firm sharing profits in the ratio of their capitals. On the 31st March 2013 their Balance Sheet was as follows:
| Balance Sheet of Hanif and Jubed as on 31st March 2013 | |||
| Liabilities | Rs | Assets | Rs |
|
Creditors Workman Companion Fund General Reserve Hanif’s Current Account Capital's: Hanif 10,00,000 Jubed 5,00,000 |
1,50,000 3,00,000 75,000 25,000
15,00,000 |
Bank Debtors Stock
Furniture Machinery Jubed’s Current Account |
2,00,000 3,40,000 1,50,000
4,60,000 8,20,000 80,000 |
| 20,50,000 | 20,50,000 | ||
On the above date the firm was dissolved:
a. Debtors were realised at a discount of 5%, 50% of the stock was taken over by Hanif at 10% less than the book value. Remaining stock was sold for Rs 65,000.
b. Furniture was taken over by Jubed for Rs 1,35,000. Machinery was sold as scrap for Rs 74,000.
c. Creditors were paid in full.
d. Expenses on realisation Rs 8,000 were paid by Hanif.
Prepare Realisation Account.
Sita and Gita were partners sharing profits and losses in the ratio of 4 : 5. They dissolved their partnership on 31st March, 2021, when their Balance Sheet showed the following balances:
| Particulars | (₹) |
| Sita’s Capital | 30,000 |
| Gita’s Capital | 35,000 |
| Gita’s Current A/c (Dr) | 2,000 |
| Contingency Reserve | 18,000 |
| P/L A/c (Dr) | 4,500 |
On the date of dissolution:
- The firm, upon realisation of assets and settlement of liabilities, made a profit of ₹ 9,000.
- Gita paid the realisation expenses of ₹ 2,000.
- Gita discharged the outstanding salary of the manager of the firm of ₹ 1,000 which was unrecorded in the books.
You are required to prepare the Partners’ Capital Accounts.
Who is called Insolvent person?
Who should bear the capital deficiency of an insolvent partner?
Which account is debited on repayment of Partner's Loan?
Write the word/term /phrase, which can substitute the following statements.
"Debit balance in realisation account."
On dissolution of a firm, a partner paid ₹ 700 for the firm's realisation expenses. Which account will be debited?
On dissolution, the balance of 'Profit and Loss Account' appearing on the Assets side of the Balance Sheet is transferred to:
Unrecorded liability when paid on the dissolution of a firm is transferred to ______
At the time of dissolution of the firm, at which stage the balance of the partner's capital accounts is paid?
In the event of dissolution of a partnership firm, the provision for doubtful debts is transferred to ______.
If goodwill is already appearing in the books of accounts at the time of retirement of a partner, then it should be written off in ______.
On dissolution, if a partner undertakes to make payment of a liability of the firm is debited to ______.
Give the necessary Journal entries for the following transactions on dissolution of the firm of Sonu and Monu on 31st March, 2021, after transfer of various assets (other than cash and bank balance) and the third party liabilities to Realisation Account. They shared profits and losses in the ratio of 2 : 1.
- Sonu agreed to take over the firm's goodwill (not recorded in the books of the firm) at a valuation of ₹ 40,000.
- Bills payable of ₹ 30,000 falling due on 30th April, 2021 were discharged at ₹ 29,550.
- Stock worth ₹ 8,00,000 was taken over by partner, Sonu at 10% discount.
- Creditors off ₹ 2,00,000 accepted machinery valued at ₹ 2,20,000 in full settlement of their claim.
- Expenses of realisation ₹ 10,000 were paid by partner, Sonu.
T, U and V were partners in a firm sharing profits and losses in the ratio of 2 : 1 : 2. Their firm was incurring huge losses thus it had to be closed. After transferring assets (other than cash in hand and bank) and third party liabilities to Realization Account the following transactions took place:
- T took away 50% of the stock at book value less 10% for ₹ 90,000, and the remaining stock was sold for ₹ 40,000.
- Creditors of ₹ 78,000 took over machinery of ₹ 80,000 in full settlement of their claim.
- ₹ 5,000 debtors previously written off were recovered.
- Mrs. V's loan of ₹ 72,000 was paid by the firm.
- Loss on dissolution was ₹ 80,000.
Pass necessary journal entries for the above transactions in the book of T. U and V.
G and M were partners in a firm sharing profits and losses in the ratio of 3 : 2. on 31st March 2022, their balance sheet was as follows:
| Balance Sheet of G and M as on 31st March, 2022 | ||||
| Liabilities | Amount (₹) | Amount (₹) | Assets | Amount (₹) |
| Creditors | 50,000 | Bank | 75,000 | |
| Outstanding Expenses | 45,000 | Other Current Assets | 4,80,000 | |
| Provision for Doubtful Debts | 5,000 | Machinery | 7,00,000 | |
| 9% Loan | 15,00,000 | Land and Building | 15,00,000 | |
| Capitals: | Patents | 10,000 | ||
| G | 6,00,000 | Profit and Loss Account | 15,000 | |
| M | 7,00,000 | Goodwill | 1,20,000 | |
| Total | 29,00,000 | Total | 29,00,000 | |
On the above date, the firm was dissolved. Other current assets realised 10% less. Land and building and machinery were sold at their book value. 9% loan was discharged with unrecorded interest of ₹1,35,000. Expenses on dissolution amounted to ₹10,000.
Prepare Realisation Account.
On dissolution of the partnership firm of A, B and C, the accumulated profits of ₹ 40,000 will be transferred to which of the following account?
C, D, E were partners in a firm sharing profits in the ratio of 3 :1: 1. Their Balance Sheet as at 31st March, 2022 were as follows:
| Balance Sheet of C, D and E as at 31st March,2022 | ||||
| Liabilities | Amount (₹) | Amount (₹) | Assets | Amount (₹) |
| Capitals: | Machinery | 3,20,000 | ||
| C | 4,00,000 | 7,00,000 | Investments | 3,00,000 |
| D | 2,00,000 | Stock | 2,00,000 | |
| E | 1,00,000 | Debtors | 1,00,000 | |
| C's Loan | 1,20,000 | Cash at Bank | 2,00,000 | |
| Sundry Creditors | 1,00,000 | |||
| Bills Payable | 2,00,000 | |||
| 11,20,000 | 11,20,000 | |||
On the above date the firm was dissolved due to certain disagreements among the partners:
- Machinery of ₹ 3,00,000 were given to creditor in full settlement of their amount and remaining machinery was sold for ₹ 10,000.
- Investments realised ₹ 2,90,000.
- Stock was sold for ₹ 1,80,000.
- Debtors for ₹ 20,000 proved bad.
- Realisation expenses amounted at ₹ 10,000
Prepare Realisation Account.
