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Question
X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 2 : 1 respectively. The firm was dissolved on 1st March, 2013. After transferring assets (other than cash) and third party liabilities to the 'Realisation Account' you are provided with the following information:
(a) There was a balance of ₹ 18,000 in the firm's Profit and Loss Account.
(b) There was an unrecorded bike of ₹ 50,000 which was taken over by X.
(c) Creditors of ₹ 5,000 were paid ₹ 4,000 in full settlement of accounts.
Pass necessary Journal entries for the above at the time of dissolution of firm.
Solution
Journal
|
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
1. |
Profit and Loss A/c* |
Dr. |
|
18,000 |
|
|
|
To X’s Capital A/c |
|
|
|
9,000 |
|
|
To Y’s Capital A/c |
|
|
|
6,000 |
|
|
To Z’s Capital A/c |
|
|
|
3,000 |
|
|
(Balance in P&L A/c divided among Partners in the ratio of 3:2:1) |
|
|
|
|
|
2. |
X’s Capital A/c |
Dr. |
|
50,000 |
|
|
|
To Realisation A/c |
|
|
|
50,000 |
|
|
(An unrecorded asset taken over by X) |
|
|
|
|
|
3. |
Realisation A/c |
Dr. |
|
4,000 |
|
|
|
To Bank A/c |
|
|
|
4,000 |
|
|
(Creditors were paid Rs 4,000 in full settlement |
|
|
|
|
|
|
of their claim of Rs 5,000) |
|
|
|
|
*Balance in Profit and Loss A/c always mean positive balance i.e. credit balance.
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| Liabilities |
Amount (Rs.) |
Assets | Amount (Rs.) | Amount (Rs.) |
| Creditors | 40,000 | Cash | 16,000 | |
| Lily’s loan | 32,000 | Debtors | 80,000 | 76,400 |
| Profit and Loss | 50,000 |
Less: Provision for doubtful Debts |
3600 | |
| Capitals: | Inventory | 109,600 | ||
| Lily | 160,000 | Bills Receivable | 40,000 | |
| Rose | 240,000 | Buildings | 280,000 | |
| 522,000 | 522,000 |
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Show Realisation Account, Partners Capital Account, Loan Account and Cash Account.
Ashu and Harish are partners sharing profit and losses as 3:2. They decided to dissolve the firm on December 31, 2017. Their balance sheet on the above date was:
Balance Sheet of Ashu and Harish as on December 31, 2017
| Liabilities | Amt (Rs.) | Amt (Rs.) | Assets | Amt (Rs.) |
| Capitals: | 162,000 | Building | 80,000 | |
| Ashu | 108,000 | Machinery | 70,000 | |
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| Bank overdraft | 50,000 | Investments | 60,000 | |
| Debtors | 48,000 | |||
| Cash in hand | 8,000 | |||
| 300,000 | 300,000 |
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Balance Sheet of Ashok, Babu and Chetan as on December 31, 2017
|
Liabilities |
Amt (Rs.) |
Assets |
Amt (Rs.) |
||
|
Sundry Creditors |
20,000 |
Bank |
7,500 |
||
|
Bills payable |
25,500 |
Sundry Debtors |
58,000 |
||
|
Babu’s loan |
30,000 |
Stock |
39,500 |
||
|
Capital’s: |
1,52,000 |
Machinery |
48,000 |
||
|
Ashok |
70,000 |
Investment |
42,000 |
||
|
Babu |
55,000 |
Freehold Property |
50,500 |
||
|
Chetan |
27,000 |
|
|
||
|
Current Accounts : |
18,000 |
|
|||
|
Ashok |
10,000 |
|
|||
|
Babu |
5,000 |
|
|||
|
Chetan |
3,000 |
|
|||
|
|
|
2,45,500 |
|
2,45,500 |
|
The Machinery was taken over by Babu for Rs 45,000, Ashok took over the Investment for Rs 40,000 and Freehold property was taken over by Chetan at Rs 55,000. The remaining Assets realised as follows: Sundry Debtors Rs 56,500 and Stock Rs 36,500. Sundry Creditors were settled at discount of 7%. A Office computer, not shown in the books of Accounts realised Rs 9,000. Realisation expenses amounted to Rs 3,000.
Prepare Realisation Account, Partners Capital Account, Bank Account.
Pass necessary Journal entries for the following transactions on the dissolution of the firm P and Q after the various assets (other than cash) and outside liabilities have been transferred to Realisation Account:
(a) Bank Loan ₹ 12,000 was paid.
(b) Stock worth ₹ 16,000 was taken over by partner Q.
(c) Partner P paid a creditor ₹ 4,000.
(d) An asset not appearing in the books of accounts realised ₹ 1,200.
(e) Expenses of realisation ₹ 2,000 were paid by partner Q.
(f) Profit on realisation ₹ 36,000 was distributed between P and Q in 5 : 4 ratio.
Vinod, Vijay and Venkat are partners sharing profits and losses in the ratio of 3 : 2 : 1. They decided to dissolve their firm on 31st March, 2019, the date on which their Balance Sheet stood as:
|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
| Creditors |
17,000 |
Bank | 3,500 | ||
| Bills Payable | 12,000 | Stock | 19,800 | ||
| Vinod's Loan |
5,300 |
Debtors |
15,000 |
|
|
| General Reserve |
6,000 |
Less: Provision for Doubtful Debts |
1,000 |
14,000 |
|
| Capital A/cs: | Investments | 4,000 | |||
| Vinod | 25,000 | Furniture | 10,000 | ||
| Vijay |
11,000 |
|
Machinery | 33,000 | |
| Venkat |
8,000 |
44,000 |
|||
|
84,300 |
84,300 |
||||
The following additional information is given:
(a) The Investments are taken by Vinod for ₹ 5,000 in settlement of his loan
(b)
| Assets realised as follows: | ₹ |
| Stock | 17,500 |
| Debtors | 14,500 |
| Furniture | 6,800 |
| Machinery | 30,300 |
(c) Expenses on realisation amounted to ₹ 2,000.
Close the books of the firm giving relevant Ledger Accounts.
P, Q and R were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. They agreed to dissolve their partnership firm on 31st March, 2019. P was deputed to realise the assets and pay the liabilities. He was paid ₹ 1,000 as commission for his services. The financial position of the firm was:
Balance Sheet as at 31st March, 2019
| Liabilities | Amount (₹) |
Assets | Amount (₹) |
|||||
| Creditors | 10,000 | Stock | 5,500 | |||||
| Bills Payable | 3,700 | Investments | 15,000 | |||||
| Investments Fluctuation Reserve | 4,500 | Debtors | 7,100 | |||||
| Capital A/cs: | Less: Provision for Doubtful Debtors | 450 | 6,650 | |||||
| P | 37,550 | Cash | 5,600 | |||||
| Q | 15,000 | 52,550 | R's Capital A/c | 8,000 | ||||
| Plant and Machinery | 30,000 | |||||||
| 70,750 | 70,750 | |||||||
P took over Investments for ₹ 12,500. Stock and Debtors realised ₹ 11,500. Plant and Machinery were sold to Q for ₹ 22,500 for cash. Unrecorded assets realised ₹ 1,500. Realisation expenses paid amounted to ₹ 900.
Prepare necessary Ledger Accounts to close the books of the firm.
A, B and C were equal partners. On 31st March, 2019, their Balance Sheet stood as:
| Liabilities | Amount (₹) |
Assets | Amount (₹) |
|
| Creditors | 50,400 | Cash | 3,700 | |
| Reserve | 12,000 | Stock | 20,100 | |
| Capital A/cs: | Debtors | 62,600 | ||
| A | 40,000 | Loan to A | 10,000 | |
| B | 25,000 | Investments | 16,000 | |
| C | 15,000 | 80,000 | Furniture | 6,500 |
| Building | 23,500 | |||
| 1,42,400 | 1,42,400 | |||
The firm was dissolved on the above date on the following terms:
(a) For the purpose of dissolution, Investments were valued at ₹ 18,000 and A took over the Investments at this value.
(b) Fixed Assets realised ₹ 29,700 whereas Stock and Debtors realised ₹ 80,000.
(c) Expenses of realisation amounted to ₹ 1,300.
(d) Creditors allowed a discount of ₹ 800.
(e) One Bill receivable for ₹ 1,500 under discount was dishonoured as the acceptor had become insolvent and was unable to pay anything and hence the bill had to be met by the firm.
Prepare Realisation Account, Partner's Capital Accounts and Cash Account showing how the accounts would finally be settled among the partners.
A and B are partners in a firm sharing profits and losses in the ratio of 2 : 1. On 31st March, 2019, their Balance Sheet was:
| Liabilities | Amount (₹) |
Assets | Amount (₹) |
|||||
| Bank Overdraft | 30,000 | Cash in Hand | 6,000 | |||||
| General Reserve | 56,000 | Bank Balance | 10,000 | |||||
| Investments Fluctuation Reserve | 20,000 | Sundry Debtors | 26,000 | |||||
| A's Loan | 34,000 | Less: Provision for Doubtful Debtors | 2,000 | 24,000 | ||||
| Capital A/c: | ||||||||
| A | 50,000 | Investments | 40,000 | |||||
| Stock | 10,000 | |||||||
| Furniture | 10,000 | |||||||
| Building | 60,000 | |||||||
| B's Capital | 30,000 | |||||||
| 1,90,000 | 1,90,000 | |||||||
On that date, the partners decide to dissolve the firm. A took over Investments at an agreed valuation of ₹ 35,000. Other assets were realised as follows:
Sundry Debtors: Full amount. The firm could realise Stock at 15% less and Furniture at 20% less than the book value. Building was sold at ₹ 1,00,000.
Compensation to employees paid by the firm amounted to ₹ 10,000. This liability was not provided for in the above Balance Sheet.
You are required to close the books of the firm by preparing Realisation Account, Partners' Capital Accounts and Bank Account.
Following is the Balance Sheet of Arvind and Balbir as at 31st March, 2019:
|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
| Trade Creditors |
45,000 |
Cash | 750 | ||
| Bills Payable | 12,000 | Bank | 12,000 | ||
| Mrs. Arvind's Loan | 7,500 | Stock | 7,500 | ||
| Mrs. Balbir's Loan | 15,000 | Investments | 15,000 | ||
| Reserve Fund |
15,000 |
Book Debts |
30,000 |
|
|
| Investments Fluctuation Reserve |
1,500 |
Less: Provision for Doubtful Debts |
3,000 |
27,000 |
|
| Capital A/cs: | Building | 22,500 | |||
| Arvind |
15,000 |
|
Plant | 30,000 | |
| Balbir |
15,000 |
30,000 |
Goodwill |
6,000 |
|
|
|
|
Profit and Loss A/c |
5,250 |
||
|
1,26,000 |
1,26,000 |
||||
The firm was dissolved on the above date under the following arrangement:
(a) Arvind promised to pay off Mrs. Arvind's Loan and took Stock at ₹ 6,000.
(b) Balbir took half the Investments @ 10% discount.
(c) Book Debts realised ₹ 28,500.
(d) Trade Creditors and Bills Payable were due on average basis of one month after 31st March, but were paid immediately on 31st March @ 2% discount per annum.
(e) Plant realised ₹ 37,500; Building ₹ 60,000; Goodwill ₹ 9,000 and remaining Investments ₹ 6,750.
(f) An old typewriter, written off completely from the firm's books, now estimated to realise ₹ 450. It was taken by Balbir at this estimated price.
(g) Realisation expenses were ₹ 1,500.
Show Realisation Account, Capital Accounts of Partners and Bank Account.
A and B dissolve their partnership. Their position as at 31st March, 2019 was:
|
Particulars |
₹ |
| A's Capital | 25,000 |
| B's Capital | 15,000 |
| Sundry Creditors | 20,000 |
| Cash in Hand and at Bank | 750 |
The balance of A's Loan Account to the firm stood at ₹ 10,000. The realisation expenses amounted to ₹ 350. Stock realised ₹ 20,000 and Debtors ₹ 25,000. B took a machine at the agreed valuation of ₹ 7,500. Other fixed assets realised ₹ 20,000.
You are required to close the books of the firm.
The partnership between A and B was dissolved on 31st March, 2019. On that date the respective credits to the capitals were A − ₹ 1,70,000 and B − ₹ 30,000. ₹ 20,000 were owed by B to the firm; ₹ 1,00,000 were owed by the firm to A and ₹ 2,00,000 were due to the Trade Creditors. Profits and losses were shared in the proportions of 2/3 to A, 1/3 to B.
The assets represented by the above stated net liabilities realise ₹ 4,50,000 exclusive of ₹ 20,000 owed by B. The liabilities were settled at book figures. Prepare Realisation Account, Partners' Capital Accounts and Cash Account showing the distribution to the partners.
