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Question
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.
Solution
| Partner's Capital Account | |||||
| Particulars | Sita (₹) | Gita (₹) | Particulars | Sita (₹) | Gita (₹) |
| To Current A/c | 2,000 | By Balance b/d | 30,000 | 35,000 | |
| To P/L (Dr.) | 2,000 | 2,500 | By Contingency Reserve | 8,000 | 10,000 |
| By Realisation (Profit) | 4,000 | 5,000 | |||
| By Realisation (Expenses) | - | 2,000 | |||
| To Bank A/c | 40,000 | 48,500 | By Realisation (Manager salary) |
- | 1,000 |
| 42,000 | 53,000 | 42,000 | 53,000 | ||
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RELATED QUESTIONS
Srijan, Raman and Manan were partners in a firm sharing profits and losses in the ratio of 2: 2: 1. On 31st March 2017 their Balance Sheet was as follows:
| Balance Sheet of Srijan , Raman and Manan as on 31.3.2017 |
|||
| Liabilities |
Amount Rs |
Assets
|
Amount Rs |
|
Capitals: Srijan 2,00,000 Raman 1,50,000 Creditors Bills Payable Outstanding Salary
|
3,50,000 75,000 40,000 35,000
|
Capital: Manan Plant Investment Stock Debtors Bank Profit & Loss A/c |
10,000 2,20,000 70,000 50,000 60,000 10,000 80,000 |
| 5,00,000 | 5,00,000 | ||
On the above date, they decided to dissolve the firm.
1) Srijan was appointed to realise the assets and discharge the liabilities. Srijan was to receive 5% commission on the sale of assets (except cash) and was to bear all expenses of realisation.
2) Assets were realised as follows:
| Rs | |
| Plant | 85,000 |
| Stock | 33,000 |
| Debtors | 47,000 |
3) Investments were realised at 95% of the book value.
4) The firm had to pay Rs 7,500 for an outstanding repair bill not provided for earlier.
5) A contingent liability in respect of bills receivable, discounted with the bank had also materialised and had to be discharged for Rs 15,000.
6) Expenses of realisation amounting to Rs 3,000 were paid Srijan.
Prepare Realisation Account Partners' Capital Accounts and Bank Account.
When is Realisation Account opened?
On dissolution of the firm, loss calculated in Realisation Account is debited/credited to which account?
Where would the interest on capital be recorded if the fixed capital account is followed in the partnership firm?
On taking responsibility for payment of realisation expenses by a partner, the account credited will be:
Unrecorded liability when paid on the dissolution of a firm 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 ______.
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.
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.
