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Question
Mita and Sita, sharing profits in, the ratio 2 : 1, decided to dissolve their partnership firm on 31st March, 2022, on which date their Balance Sheet was as under:
| Balance Sheet of Mita and Sita as on 31st March, 2022 |
|||||
| Liabilities | (₹) | Assets | (₹) | ||
| Sundry Creditors | 40,000 | Land & Building | 29,000 | ||
| Sita's Son's Loan | 2,000 | Plant & Machinery | 20,000 | ||
| Bank Overdraft | 8,000 | Stock | 3,000 | ||
| Capital Accounts: | Debtors | 26,400 | 26,000 | ||
| Mita | 20,000 | 30,000 | Less: Provision for Doubtful Debts |
400 | |
| Sita | 10,000 | Bank | 2,000 | ||
| 80,000 | 80,000 | ||||
The partnership firm was dissolved on the date of the Balance Sheet subject to the following adjustments:
- Trade creditors accepted plant and machinery at an agreed valuation of 10% less than the book value and the balance in cash in full settlement of their claims.
- Debtors of ₹ 1,000 proved bad.
- Sita took over the stock at a discount of 20%.
- Realisation expenses of ₹ 1,100 were paid by the firm.
You are required to prepare the Realisation Account.
Solution
| Dr. | Realisation Account | Cr. | ||
| Particulars | Amount (₹) | Particulars | (₹) | Amount (₹) |
| To Land and Building | 29,000 | By Provision for Doubtful Debts |
400 | |
| To Plant & Machinery | 20,000 | By Sundry Creditors | 40,000 | |
| To Stock | 3,000 | By Sita's Son's Loan | 2,000 | |
| To Debtors | 26,400 | By Sita's capital A/c (stock) | 2,400 | |
| To Bank (Creditors paid) | 22,000 | By Bank: | ||
| To Bank (Expenses) | 1,100 | Debtors | 25,400 | 25,400 |
| To Bank (Sita's son's loan) | 2,000 | By Loss Transferred to: | ||
| Mita's Capital A/c | 22,200 | 33,300 | ||
| Sita's Capital A/c | 11,100 | |||
| 1,03,500 | 1,03,500 | |||
Amount payable to creditors = 40,000 - (20,000 - (20,000 × 10%))
= 40,000 - 18,000
= ₹ 22,000
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A, B and C were partners sharing profits and losses in the ratio of 3:2:1. On 31st March, 2010. Their Balance Sheet was as follows:
Balance Sheet as on 31st March, 2010
| Liabilities | Amount (Rs) | Assets | Amount (Rs) | |
| Sundry Creditors | 15400 | Cash at Bank | 3500 | |
| Bills payable | 3600 | Stock | 19800 | |
| A’s loan A/c | 10000 | Debtors | 15000 | 14000 |
| Capital Account: | Less : Provision | 1000 | ||
| A | 20000 | Join Life Policy | 4000 | |
| B | 16000 | Plant and Machinery | 43700 | |
| C | 8000 | |||
| Reserve Fund | 12000 | |||
| 85000 | 85000 | |||
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2) Stock realised Rs 18,000, Debtors realised Rs 14,500, Plant and Machinery was sold for Rs 36,000.
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4) There were no realisation expenses.
Give the Journal entries and necessary Ledger Accounts to close the books of the firm.
State the difference between dissolution of partnership and dissolution of partnership firm.
State whether the following statement is True or False.
At the time of disolution of a partnership firm all assets should be transfered to realiasation account.
In the event of dissolution of the firm, the partner's assets are first used for payment of the following:
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 ______.
A, B and C are in partnership business. A used ₹ 2,00,000 belonging to the firm without the information to other partners and made a profit of ₹ 35,000 by using this amount. Which decision should be taken by the firm to rectify this situation?
Ira (a partner in a firm) was allowed to retain the whole of the stock as her remuneration for services rendered by her in the course of dissolution of the firm. The value of stock was ₹ 10,000 which had been transferred to the Realisation Account.
Complying with the accounting principle of full disclosure, record the above transaction in the books of the partnership firm at the time of its dissolution.
