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Question
Sangeeta, Anita, and Smita were in partnership sharing Profits and Losses in the ratio 2: 2: 1. Their Balance Sheet as on 31st March 2019 was as under:
| Balance Sheets as on 31st March, 2019 | |||
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Capital: | Land | 2,10,000 | |
| Sangeeta | 60,000 | Plant | 20,000 |
| Anita | 40,000 | Goodwill | 15,000 |
| Smita | 30,000 | Debtors | 1,25,000 |
| Sangeeta’s Loan A/c | 1,20,000 | Loans and Advances | 15,000 |
| Sundry Creditors | 1,20,000 | Bank | 5,000 |
| Bills Payable | 20,000 | ||
| 3,90,000 | 3,90,000 | ||
They decided to dissolve the firm as follows:
1. Assets realised as; Land recovered ₹ 1,80,000; Goodwill for ₹ 75,000; Loans and Advances realised ₹ 12,000; 10% of the Debts proved bad;
2. Sangeeta took Plant at book value.
3. Creditors and Bills payable paid at 5% discount.
4. Sangeeta’s Loan was discharged along with ₹ 6,000 as Interest.
5. There was a contingent liability in respect of bills of ₹ 1,00,000 which was under discount. Out of them, a holder of one bill of ₹ 20,000 became insolvent
Show Realisation Account, Partners Capital Account, and Bank Account.
Solution
In the books of Sangeeta, Anita and Smita
| Dr. | Realisation A/c | Cr. | |||||
| Particulars | Amount (₹) | Amount (₹) | Particulars | Amount (₹) | Amount (₹) | ||
| To Sundry Assets A/c: | By Sundry Liabilities A/c: | ||||||
| Land | 2,10,000 | Sundry Creditors | 1,20,000 | ||||
| Plant | 20,000 | Bills Payable | 20,000 | 140,000 | |||
| Goodwill | 15,000 | ||||||
| Debtors | 1,25,000 | By Sangeeta’s Capital A/c (Plant) | 20,000 | ||||
| Loans and Advances | 15,000 | 3,85,000 | By Bank A/c | ||||
| To Bank A/c | Land | 1,80,000 | |||||
| Creditors | 1,14,000 | Goodwill | 75,000 | ||||
| Bills Payable | 19,000 | 1,33,000 | Loans and Advances | 12,000 | |||
| To Interest Sungeeta's loan A/c | 6,000 | Debtors | 1,12,500 | 3,79,500 | |||
| To Bank A/c (Contingent liability paid) |
20,000 | By Partners’ Capital A/c (Loss on realisation transferred) | |||||
| Sangeeta`[2/5 × 4500]` | 1,800 | ||||||
| Anita`[2/5 × 4500]` | 1,800 | ||||||
| Smita `[1/5 × 4500]` | 900 | 4,500 | |||||
| 5,44,000 | 5,44,000 | ||||||
| Dr | Partners’ Capital Accounts | Cr | |||||||
| Particulars | Sangeeta (₹) | Anita (₹) | Smita (₹) | Particulars | Sangeeta (₹) | Anita (₹) | Smita (₹) | ||
| To Realisation A/c | 20,000 | – | – | By Balance b/d | 60,000 | 40,000 | 30,000 | ||
| To Realisation A/c – Loss | 1,800 | 1,800 | 900 | ||||||
| To Bank A/c | 38,200 | 38,200 | 29,100 | ||||||
| 60,000 | 40,000 | 30,000 | 60,000 | 40,000 | 30,000 | ||||
| Dr. | Sangeeta’s Loan A/c | Cr. | |
| Particulars | Amount (₹) | Particulars | Amount (₹) |
| To Bank A/c | 120,000 | By Balance b/d | 120,000 |
| 120,000 | 120,000 | ||
| Dr | Bank Account | Cr | |||
| Particulars | Amount (₹) | Particulars | Amount (₹) | ||
| To Balance b/d | 5,000 | By realisation A/c – Liabilities | 1,33,000 | ||
| To realisation A/c – Assets | 3,79,500 | By Sangeeta’s Loan A/c | 1,20,000 | ||
| By Interest Loan A/c | 6,000 | ||||
| By realisation A/c - Contingent liability paid | 20,000 | ||||
| By Sangeeta’s Capital A/c | 38,200 | ||||
| By Anita’s Capital A/c | 38,200 | ||||
| By Smita’s Capital A/c | 29,100 | ||||
| 3,84,500 | 3,84,500 | ||||
Working Notes :
(1) Amount paid towards Sangeeta’s Loan = Loan amount + Interest due on loan
= 1,20,000 + 6,000 = ₹ 1,26,000
(2) Amount received from Debtors = Debtors – Bad debts
= 1,25,000 – 10 % of 1,25,000 = 1,25,000 – 12,500
= ₹ 1,12,500
(3) Amount paid to Creditors = Creditor – 5 % discount
= 1,20,000 – 5 % on 1,20,000
= 1,20,000 – 6,000
= ₹ 1,14,000
(4) Amount paid towards Bills payable = Bills payable – 5 % discount
= 20,000 – 5 % on 20,000
= 20,000 – 1,000
= ₹ 19,000
(5) Bill of ₹ 1,00,000 was discounted with the Bank. On the due date bank could not recover ₹ 20,000 from one bill holder as he was declared insolvent. Therefore, we required to settle that contingent liability of ₹ 20,000.
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| Balance Sheet as on 31st March, 2009 | |||
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Balance Sheet as on 31st March, 2008
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Balance Sheet as on 31st March, 2012
| Liabilities | Amount (Rs) | Assets | Amount (Rs) | |
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| Balance Sheets as on 31st March 2018. | |||
| Liabilities | Amount ₹ | Assets | Amount ₹ |
| Creditors | 18,400 | Building | 88,000 |
| Bills Payable | 5,600 | Furniture | 12,000 |
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| 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 | |||
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2. Debtors Realised 90% of the Book Value and Trademark at ₹ 5,000. and Goodwill was realised for ₹ 7,000.
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4. ₹ 1,000 Discount were allowed by creditors while paying their claim.
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You are required to pass necessary entries for all the above-mentioned transactions.
Mandar and Prasad are partners in a firm sharing profit & losses in the ratio of 3 : 2. The following is their balance sheet as on 31st March, 2019.
| Liabilities | Amount (₹) | Assets | Amount (₹) | |
| Capital A/c: | Building | 72,000 | ||
| Mandar | 95,000 | Plant & Machinery | 60,000 | |
| Prasad | 1,00,000 | Furniture | 10,000 | |
| Creditors | 4,000 | Debtors | 42,000 | 40,000 |
| Bills Payable | 3,000 | Less: RDD | 2,000 | |
| Bank | 20000 | |||
| 2,02,000 | 2,02,000 |
On 1st April, 2019 Shubham is admitted for 1/2 share on the following terms:
- He paid ₹ 1,00,000 as Capital ₹ 40,000 as his shares of goodwill by RTGS.
- Plant & Machinery revalued at ₹ 48,000.
- Building is taken over by Mandar at ₹ 100,000.
- Reserve for Doubtful Debts (RDD) to be increased upto ₹ 4,000.
- The old partners decided to retain half of the amount of goodwill in the business.
- The old partners decided to sacrifice equally.
Prepare Partners' Capital Account Only and show your working clearly.
A firm consisting of partners Mukund, Sachin and Yuvraj decided to dissolve the partnership They decided to take over certain assets and liabilities and continue the business separately. The Balance Sheet was as under.
| Balance Sheet as on 31st March, 2020 | |||||
| Liabilities | Amount (₹) |
Assets | Amount (₹) |
||
| Capital A/c: | Furniture | 2,000 | |||
| Mukund | 55,000 | 89,000 | Sundry Assets | 34,000 | |
| Sachin | 20,000 | Debtors | 48,400 | 46,000 | |
| Yuvraj | 14,000 | Less: RDD | 2,400 | ||
| Creditors | 12,000 | Stock | 15,600 | ||
| Loan | 3,000 | Cash | 6,400 | ||
| 1,04,000 | 1,04000 | ||||
It was agreed as under:
- Mukund is to take Furniture at ₹ 1,600 and the Debtors amounting to ₹ 40,000 at ₹ 34,400 only. He accepted the Creditors on ₹ 12,000 at that figure.
- Sachin is to take over all Stock at ₹ 14,000 and Sundry Assets worth ₹ 16,000 at ₹ 14,400 only.
- Yuvraj is to take over the remaining Sundry Assets at ₹ 16,000 and assume the responsibility for the discharge of the loan together will accrued interest on a loan of ₹ 60. which has not been recorded in accounts.
- The dissolution expenses were ₹ 540.
- The remaining debtors realised only ₹ 4,200.
- The necessary adjustments were made by partners to settle their accounts.
Prepare Realisation Account, Partners Capital Account, and Cash Account, after giving effect to the above adjustments.
Complete the table.
| Debit side total of Realisation A/c |
Credit side total of Realisation A/c |
Loss on Realisation |
| ₹ 20,000 | ? | ₹ 4,000 |
Complete the following table:
| Debit side total of Capital A/c |
Credit side total of Capital A/c |
Cash brought by Partner |
| ₹ 51,000 | ? | ₹ 17,000 |
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| Balance sheet as on 31st March,2019 | |||
| Liabilities | Amount ₹ | Assets | Amount ₹ |
| Capital Account: | Machinery | 1,00,000 | |
| Hema | 1,50,000 | Debtors | 50,000 |
| Manisha | 80,000 | Stock | 70,000 |
| Reserve Fund | 10,000 | Cash at Bank | 30,000 |
| Sundry Creditors | 20,000 | Limsy Capital A/c | 20,000 |
| Bills payable | 10,000 | ||
| 2,70,000 | 2,70,000 | ||
The firm was dissolved on 31st March, 2019 and assets were realised as under:
- Machinery realised 60% of its book value.
- Out of debtors, Mr. Jagdish, our customer for ₹ 20,000 was declared insolvent and nothing could be recovered from him. Other debtors are good and recovered and realised.
- Hema took stock at an agreed value of ₹ 50,000.
- Creditors and Bills payable were paid at 10% discount.
- Limsy became insolvent and nothing was recovered from her estate.
Prepare:
- Realisation Account
- Partners’ Capital Account
- Bank Account
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- An unrecorded asset of ₹ 18,000 was taken over by Tina at ₹ 16,000.
- Rina agreed to pay her brother's loan of ₹ 23,000.
- Stock of ₹ 30,000 was taken over by a creditor of ₹ 40,000 in full settlement.
- Expenses of dissolution ₹ 40,000 were paid by Rina.
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- Tina's loan of ₹ 15,000 was paid through a cheque.
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Pass necessary Journal Entries for the following transactions on the dissolution of a partnership firm of Mita and Sonu on 31st March, 2022 after the various assets other than cash and third party liabilities have been transferred to the Realisation Account.
- Creditors of ₹ 90,000 took over Land and Building of ₹ 2,00,000 in full settlement of their claim.
- Sonu took over debtors amounting to ₹ 50,000 at ₹ 40,000.
- Realisation expenses ₹ 1,800 were paid by Sonu.
- A machine which was not recorded in the books was taken over by Mita at ₹ 11,000 while its expected market value was ₹ 15,000.
- Sortu agreed to pay off his wife's loan of ₹ 20,000.
- Profit on dissolution amounted at ₹ 50,000.
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?
Insolvent partner Capital A/c debit side total is ₹ 25,000 and credit side total is ₹ 10,000. Calculate deficiency.
Vinay, Premal and Monil were in partnership sharing profits and losses in the ratio 2 : 2 : 1. They decided to dissolve their partnership firm on 31st March, 2023 and their Balance Sheet on that date stood as:
| Balance Sheet as on 31st March, 2023 | |||||
| Liabilities | Amount (₹) | Amount (₹) | Assets | Amount (₹) | Amount (₹) |
| Capital : | Plant | 2,40,000 | |||
| Vinay | 1,80,000 | 3,60,000 | Debtors | 90,000 | |
| Premal | 1,20,000 | Stock | 1,50,000 | ||
| Monil | 60,000 | ||||
| Loan | 24,000 | ||||
| Sundry Creditors | 18,000 | ||||
| Bank Overdraft | 78,000 | ||||
| 4,80,000 | 4,80,000 | ||||
It was agreed that:
(1) Vinay to discharge Loan and to take Debtors at book value.
(2) Plant realised ₹ 2, 70,000.
(3) Stock realised ₹1,44,000.
( 4) Creditors were paid off at a discount of ₹ 90.
Show Realisation Account, Partner's Capital Accounts and 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
A firm having a debtor of ₹ 30,000 from whom the amount was due on 30th June, 2023, gets dissolved on 31st March, 2023. The debtor cleared his dues on the date of dissolution of the firm at a discount of 4% per annum.
Give the journal entry passed by the firm to realise the payment from the debtor.
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.
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.
