Question:1

Land and Building bookvalue 1,60,000 sold for 3,00,000 through a broker who charged 2% commission on the deal. Journalise the transaction, at the time of dissolution of the
firm.
Solution:
In the books of the firm
Journal
Debit Credit
Date Particulars L.F. Amount Amount
( ) ( )
On the Cash/ Bank A/c 3, 00, 000– 6, 000 Dr. 2,94,000
Date of To Realisation A/c 3, 00, 000– 6, 000 2,94,000
Dissolution Beingamountrealizedfromlandandbuildingafterprovidingfor2

Question:2
Pass Journal entries in the following cases?
a Expenses of realisation 1,500.
b Expenses of realisation 600 but paid by Mohan, a partner.
c Mohan, one of the partners of the firm, was asked to look into the dissolution of the firm for which he was allowed a commission of 2,000.
d Motor car of book value 50,000 taken over by creditors of the book value of 40,000 in full settlement.
Solution:
Journal
Debits Credit
S.N. Particulars L.F. Amount Amount
Rs Rs
a Realisation A/c Dr. 1,500
To Cash A/c 1,500
Realisationexpensespaid

b Realisation A/c Dr. 600

To Mohan’s Capital A/c 600
RealisationexpensespaidbyMohan

c Realisation A/c Dr. 2,000

To Mohan’s capital A/c 2,000
CommissionallowedtoMohanondissolutionofthefirm

d No entry
No journal entry is passed because both motor car
and creditors accounts have already been
transferred to Realisation Account and nothing is
recovered or paid in terms of Cash and Bank

Question:3
Pass Journal entries for the following:
a Realisation expenses of 15,000 were to be met by Rahul, a partner, but were paid by the firm.
b Ramesh, a partner, was paid remuneration of 25,000 and he was to meet all expenses.
c Anuj, a partner, was paid remuneration of 20,000 and he was to meet all expenses. Firm paid an expense of 5,000.
Solution:
Journal
Debits Credit
S.N. Particulars L.F. Amount Amount
Rs Rs
a Rahul’s Capital A/c Dr. 15,000
To Cash A/c
RealisationExpensespaidbyRahul 15,000

b Realisation A/c Dr. 25,000

To Ramesh’s Capital A/c 25,000
RemunerationallowedtoRameshonaccountoftakingresponsibilityofdissolution

c Realisation A/c Dr. 20,000

To Anuj’s Capital A/c 20,000

( Remuneration allowed to Anuj)

Anuj’s Capital A/c Dr. 5,000

To Bank A/c 5,000
(Realisation expenses paid by the firm
on behalf of Anuj)

Question:4
Pass Journal entries for the following:
a Realisation expenses amounted to 10,000 were paid by the firm on behalf of Alok, a partner, with whom it was agreed at 7,500.
b Realisation expenses amounted to 5,000. It was agreed that the firm will pay 2,000 and balance by Ravinder, a partner.
c Dissolution expenses amounted to 10,000 were paid by Amit, a partner, on behalf of the firm.
Solution:
Journal
Debits Credit
S.N. Particulars L.F. Amount Amount
Rs Rs
a Realisation A/c Dr. 7,500
 To Alok’s Capital A/c 7,500
RemunerationallowedtoAlok
Alok’s capital A/c Dr. 10,000
To Bank A/c 10,000
ExpensespaidbythefirmonbehalfofAlok
Alternatively, only one single entry can also be
passed instead of above two entries.
Realisation A/c Dr. 7,500
Alok’s Capital A/c Dr. 2,500
To Bank A/c 10,000
Realisationexpensespaid

b Realisation A/c Dr. 5,000

To Ravinder’s Capital A/c 3,000
To Bank A/c 2,000
Realisationexpensespaid

c Realisation A/c Dr. 10,000

To Amit’s Capital A/c 10,000
RealisationexpensespaidbyAmitonbehalfofthefirm

Question:5
Record necessary Journal entries in the following cases:
a Creditors worth 85,000 accepted 40,000 as cash and Investment worth 43,000, in full settlement of their claim.
b Creditors were 16,000. They accepted Machinery valued at 18,000 in settlement of their claim.
c Creditors were 90,000. They accepted Building valued at 1,20,000 and paid cash to the firm 30,000.
Solution:
Journal
Amount Amount
Particulars L.F.

a Realisation A/c Dr. 40,000

To Cash A/c 40,000
CreditorsworthRs85, 000accepted40, 000ascashandinvestmentworthRs43, 000infullsettlement

b No Entry
CreditorsworthRs16, 000acceptedMachineryworthRs18, 000infullsettlement. NoentryasbothassetandliabilityarealreadytransferredtotheRealisationAccount

c Cash A/c Dr. 30,000

To Realisation A/c 30,000
CreditorsworthRs90, 000acceptedBuildingworthRs1, 20, 000andpaidbackRs30, 000ascashaftersettlementofclaimtothefirm

Question:6
Pass Journal entries for the following at the time of dissolution of a firm:
a Sale of Assets − 50,000.
b Payment of Liabilities − 10,000.
c A commission of 5% allowed to Mr. X, a partner, on sale of assets.
d Realisation expenses amounted to 15,000. The firm had agreed with Amrit, a partner, to reimburse him up to 10,000.
e Z, an old customer, whose account for 6,000 was written off as bad in the previous year, paid 60% of the amount written off.
f Investment BookValue 10, 000 realised at 150%.
Solution:
Journal
Debits Credit
S.N. Particulars L.F. Amount Amount
Rs Rs
a Cash A/c Dr. 50,000
To Realisation A/c 50,000
Assetsrealizedforcash

b Realisation A/c Dr. 10,000

To Cash A/c 10,000
Paymentofliabilitiesmade

c Realisation A/c Dr. 2,500

To X’s Capital A/c 2,500
5

d Realisation A/c Dr. 10,000

To Amrit’s Capital A/c 10,000
Amritwasallowedremunerationonaccountofrealisation
Amrit’s Capital A/c Dr. 15,000
To Cash A/c 15,000
Realisationexpensespaidonbehalfofamrit
Alternatively, only one single entry can also be
passed instead of above two entries.
Realisation A/c Dr. 10,000
Amrit’s Capital A/c Dr. 5,000
To Cash A/c 15,000
Realisationexpensespaid

Cash A/c Dr. 3,600

e To Realisation A/c 3,600
60

Cash A/c Dr. 15,000

f To Realisation A/c 15,000
Investmentsarerealisedat150
Question:7

Pass Journal entries for the following transactions at the time of dissolution of the firm:
a Loan of 10,000 advanced by a partner to the firm was refunded.
b X, a partner, takes over an unrecorded asset Typewriter at 300.
c Undistributed balance Debit of Profit and Loss Account 30,000. The firm has three partners X,Y and Z.
d Assets of the firm realised 1,25,000.
e Y who undertakes to carry out the dissolution proceedings is paid 2,000 for the same.
f Creditors are paid 28,000 in full settlement of their account of 30,000.
Solution:
Journal
Debit Credit
Date Particulars L.F. Amount Amount
Rs Rs

a. Partner’s Loan A/c Dr. 10,000

To Bank A/c 10,000
Loanrefunded
b. X’s Capital A/c Dr. 300
To Realisation A/c 300
Unrecordedassetstookover
c. X’s Capital A/c Dr. 10,000
Y’s Capital A/c Dr. 10,000
Z’s Capital A/c Dr. 10,000
To Profit & Loss A/c 30,000
Lossdistributed
d. Bank A/c Dr. 1,25,000
To Realisation A/c 1,25,000
Assetsrealized
e. Realisation A/c Dr. 2,000
To Y’s Capital A/c 2,000
Amountgivenfordissolutionproceedings
f. Realisation A/c Dr. 28,000
To Bank A/c 28,000
Creditorspaid

Question:8
Pass necessary Journal entries for the following transactions on the dissolution of the firm P and Q after the various assets otherthancash 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.
Solution:
Journal

Debits Credit
S.N. Particulars L.F. Amount Amount
Rs Rs
a Realisation A/c Dr. 12,000
To Bank A/c 12,000
Bankloanpaidatthetimeofdissolution

b Q’s Capital A/c Dr. 16,000

To Realisation A/c 16,000
StocktakenoverbyQ

c Realisation A/c Dr. 4,000

To P’s Capital A/c 4,000
CreditorspaidbyP

d Bank A/c Dr. 1,200

To Realisation A/c 1,200
Unrecordedassetsrealised

e Realisation A/c Dr. 2,000

To Q’s Capital A/c 2,000
RealisationexpensespaidbyQ

f Realisation A/c Dr. 36,000

To P’s Capital A/c 20,000
To Q’s Capital A/c 16,000
RealisationProfitdistributed

Question:9
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 otherthancash 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
Debit Credit
Date Particulars L.F. Amount Amount
Rs 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
AnunrecordedassettakenoverbyX
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.

Question:10
Pass necessary Journal entries to record the following unrecorded assets and liabilities in the books of Paras and Priya:
a There was an old furniture in the firm which had been written off completely in the books. This was sold for 3,000.
b Ashish, an old customer whose account for 1,000 was written off as bad in the previous year, paid 60%, of the amount.
c Paras agreed to takeover the firm's goodwill notrecordedinthebooksofthefirm, at a valuation of 30,000.
d There was an old typewriter which had been written off completely from the books. It was estimated to realise 400. It was taken by Priya at an estimated price less 25%.
e There were 100 shares of 10 each in Star Limited acquired at a cost of 2,000 which had been written-off completely from the books. These shares are valued @ 6 each and
divided among the partners in their profit-sharing ratio.
Solution:
Journal
Amount Amount
Particulars L.F.

a Cash/Bank A/c Dr. 3,000

To Realisation A/c 3,000
Oldandunrecordedfurnituresold

b Cash/Bank A/c Dr. 600

To Realisation A/c 600
Baddebtspreviouslywrittenoffnowrecovered

c Paras’s Capital A/c Dr. 30,000

To Realisation A/c 30,000
UnrecordedgoodwilltakenoverbyParas

d Priya’s Capital A/c Dr. 300

To Realisation A/c 300
UnrecordedTypewritertakenoverbyPriyaat25

e Paras’s Capital A/c Dr. 300

Priya’s Capital A/c Dr. 300
To Realisation A/c 600
100unrecordedsharesofRs10eachinthebookstaken@Rs6eachbyParasandPriyaanddividedbetweentheminprofitsharingratio

Question:11
Aman and Harsh were partners in a firm. They decided to dissolve their firm. Pass necessary Journal entries for the following after various assets otherthanCashandBank and
third party liabilities have been transferred to Realisation Account:
a There was furniture worth 50,000. Aman took over 50% of the furniture at 10% discount and the remaining furniture was sold at 30% profit on book value.
b Profit and Loss Account was showing a credit balance of 15,000 on the date of dissolution.
c Harsh's loan of 6,000 was discharged at 6,200.
d The firm paid realisation expenses amounting to 5,000 on behalf of Harsh who had to bear these expenses.
e There was a bill for 1,200 under discount. The bill was received from Soham who proved insolvent and a first and final dividend of 25% was received from his estate.
f Creditors, to whom the firm owed 6,000, accepted stock of 5,000 at a discount of 5% and the balance in cash.
Solution:
Journal
Debit Credit
Date Particulars L.F. Amount Amount
Rs Rs

a. Aman’s Capital A/c Dr. 22,500

Bank A/c Dr. 32,500
To Realisation A/c 55,000
Assetsrealized

b. Profit & Loss A/c Dr. 15,000

To Aman’s Capital A/c 7,500
To Harsh’s Capital A/c 7,500
Profitdistributed

c. Harsh’s Loan A/c Dr. 6,000

Realisation A/c Dr. 200
To Bank A/c 6,200
LoanDischarged
Dr. 5,000
d. Harsh’s Capital A/c 5,000
To Bank A/c
Expensespaidonbehalfofpartner
e. Bank A/c Dr. 300
To Realisation A/c 300
Amountreceived
Realisation A/c Dr. 1,200
To Bank A/c 1,200
Amountpaid
f. Realisation A/c Dr. 1,250
To Bank A/c 1,250
Creditorspaid
 g. Aman’s Capital A/c Dr. 4,000
Harsh’s Capital A/c Dr. 4,000
To Realisation A/c 8,000
LossondissolutiontransferredtoPartners ′CapitalA/c

Question:12
Rohit, Kunal and Sarthak are partners in a firm. They decided to dissolve their firm. Pass necessary Journal entries for the following after various assets otherthanCashandBank
and the third party liability have been transferred to Realisation Account:
a Kunal agreed to pay off his wife's loan of 6,000.
b Total Creditors of the firm were 40,000. Creditors worth 10,000 were given a piece of furniture costing 8,000 in full and final settlement. Remaining Creditors allowed a
discount of 10%.
c Rohit had given a loan of 70,000 to the firm which was duly paid.
d A machine which was not recorded in the books was taken over by Kunal at 3,000, whereas its expected value was 5,000.
e The firm had a debit balance of 15,000 in the Profit and Loss Account on the date of dissolution.
f Sarthak paid the realisation expenses of 16,000 out of his private funds, who was to get a remuneration of 15,000 for completing dissolution process and was responsible to
bear all the realisation expenses.
Solution:
Journal
Debit Credit
Date Particulars L.F. Amount Amount
Rs Rs
a Realisation A/c Dr. 6,000
To Kunal’s Capital A/c 6,000
BeingKunalagreestopayoffhiswife′sloan

b Realisation A/c Dr. 27,000

To Cash A/c 27,000
BeingCreditorsworthRs30, 000paidoffatadiscountof10

c Rohit’s Loan A/c Dr. 70,000

To Cash A/c 70,000
BeingLoanpaidbythefirm

d Kunal’s Capital A/c Dr. 3,000

To Realisation A/c 3,000
BeingassettakenoverbyKunal

e Rohit’s Capital A/c Dr. 5,000

Kunal’s Capital A/c Dr. 5,000
Sarthak’s Capital A/c Dr. 5,000
To Profit and Loss A/c 15,000
BeingLossdistributedequally

f Realisation A/c Dr. 15,000

To Sarthak’s Capital A/c 15,000
BeingremunerationofRs15, 000paidforcompletionofdissolutionprocess

Question:13
Book Value of assets otherthancashandbank transferred to Realisation Account is 1,00,000. 50% of the assets are taken over by a partner Atul, at a discount of 20%; 40% of the
remaining assets are sold at a profit of 30% on cost; 5% of the balance being obsolete, realised nothing and remaining assets are handed over to a Creditor, in full settlement of
his claim.
You are required to record the Journal entries for realisation of assets.
Solution:
Journal
Amount Amount
Date Particulars L.F.

Realisation A/c Dr. 1,00,000

To Sundry Assets A/c 1,00,000
AllassetsotherthancashandbanktransferredtoRealisationAccount

Atul’s Capital A/c Dr. 40,000

To Realisation A/c 40,000
Atultookover50

1, 00, 000@50

Bank A/c Dr. 26,000

To Realisation A/c 26,000
AssetsworthRs20, 000, i. e. 40

50, 000 × (40/100)× (130/100)

No entry for obsolete assets and for the assets givento the
creditors in the full settlement as these are already transferred
tothe Realisation Account)

Question:14
Lal and Pal were partners in a firm sharing profits in the ratio of 3 : 7. On 1st April, 2015 their firm was dissolved. After transferring assets otherthancash and outsider's liabilities to
Realisation Account, you are given the following information:
a A creditor of 3,60,000 accepted machinery valued at 5,00,000 and paid to the firm 1,40,000.
b A second creditor for 50,000 accepted stock at 45,000 in full settlement of his claim.
c A third creditor amounting to 90,000 accepted 45,000 in cash and investments worth 43,000 in full settlement of his claim.
d Loss on dissolution was 15,000.
Pass necessary Journal entries for the above transactions in the books of firm assuming that all payments were made by cheque.
Solution:

In the books of …
Journal Entry
Debit Credit
Date Particulars L.F. Amount Amount
Rs Rs
a Bank A/c Dr. 1,40,000
To Realisation A/c 1,40,000
AcreditorofRs3, 60, 000acceptedmachineryvaluedatRs5, 00, 000andpaidRs1, 40, 000tothefirm

b No entry

c Realisation A/c Dr. 45,000

To Cash A/c 45,000
AthirdcreditorofRs90, 000acceptedRs45, 000incashandinvestmentsworthRs43, 000infullsettlementofhisclaim

d Lal’s Capital A/c Dr. 4,500

Pal’s Capital A/c Dr. 10,500
To Realisation A/c 15,000
Lossondissolutiontransferredtopartners ′capitalaccounts

Note: No entry will be made when asset is taken over by the creditor

Question:15
Pass the Journal entries for the following transactions on the dissolution of the firm of P and Q after various assets otherthancash and outside liabilities have been transferred to
Realisation Account:
a Stock 2,00,000. 'P' took over 50% of stock at a discount of 10%. Remaining stock was sold at a profit of 25% on cost.
b Debtors 2,25,000. Provision for Doubtful Debts 25,000. 20,000 of the book debts proved bad.
c Land and Building Bookvalue 12, 50, 000 sold for 15,00,000 through a broker who charged 2% commission.
d Machinery Bookvalue 6, 00, 000 was handed over to a creditor at a discount of 10%.
e Investment Bookvalue 60, 000 realised at 125%.
f Goodwill of 75,000 and prepaid fire insurance of 10,000.
g There was an old furniture in the firm which had been written off completely in the books. This was sold for 10,000.
h 'Z' an old customer whose account for 20,000 was written off as bad in the previous year, paid 60%.
i 'P' undertook to pay Mrs. P's loan of 50,000.
j Trade creditors 1,60,000. Half of the trade creditors accepted Plant and Machinery at an agreed valuation of 54,000 and cash in full settlement of their claims after allowing a
discount of 16,000. Remaining trade creditors were paid 90% in final settlement.

Solution:
Journal
Debit Credit
Date Particulars L.F. Amount Amount
Rs Rs

a. P’s Capital A/c Dr. 90,000

Bank A/c Dr. 1,25,000
To Realisation A/c 2,15,000
Stockrealized

b. Bank A/c Dr. 2,05,000

To Realisation A/c 2,05,000
Debtorsrealized

c. Bank A/c Dr. 14,70,000

To Realisation A/c 14,70,000
LandandBuildingrealized

d. No Entry

e. Bank A/c Dr. 75,000

To Realisation A/c 75,000
Investmentrealized

f. No Entry

g. Bank A/c Dr. 10,000

To Realisation A/c 10,000
Unrecordedfurniturerealized
h. Bank A/c Dr. 12,000
To Realisation A/c 12,000
Baddebtsrecovered

i. Realisation A/c Dr. 50,000

To P’s Capital A/c 50,000
Wife′sloanpaidbypartner

J. Realisation A/c Dr. 82,000

To Bank A/c 10, 000 + 72, 000 82,000
Creditorspaid

Question:16
What Journal entries would be passed for discharge of following unrecorded liabilities on the dissolution of a firm of partners A and B:
a There was a contingent liability in respect of bills discounted but not matured of 18,500. An acceptor of one bill of 2,500 became insolvent and fifty paise in a rupee was
recovered. The liability of the firm on account of this bill discounted and dishonoured has not so far been recorded.
b There was a contingent liability in respect of a claim for damages for 75,000, such liability was settled for 50,000 and paid by the partner A.
c Firm will have to pay 10,000 as compensation to an injured employee, which was a contingent liability not accepted by the firm.
d 5,000 for damages claimed by a customer has been disputed by the firm. It was settled at 70% by a compromise between the customer and the firm.
Solution:
Journal
Debit Credit
Date Particulars L.F. Amount Amount
Rs Rs

a. Bank A/c Dr. 1,250

To Realisation A/c 1,250
Amountreceived

Realisation A/c
To Bank A/c Dr. 2,500
Liabilitydischarged 2,500

b. Realisation A/c Dr. 50,000

To A’s Capital A/c 50,000
Liabilitypaidbyapartner
Dr. 10,000
c. Realisation A/c 10,000
To Bank A/c
Liabilitydischarged

d. Realisation A/c Dr. 3,500

To Bank A/c 3,500
Liabilitydischarged

Question:17
Pass necessary Journal entries on the dissolution of a firm in the following cases:
a Dharam, a partner, was appointed to look after the process of dissolution at a remuneration of 12,000 and he had to bear the dissolution expenses. Dissolution expenses
11,000 were paid by Dharam.
b Jay, a partner, was appointed to look after the process of dissolution and was allowed a remuneration of 15,000. Jay agreed to bear dissolution expenses. Actual dissolution
expenses 16,000 were paid by Vijay, another partner on behalf of Jay.
c Deepa, a partner, was to look after the process of dissolution and for this work she was allowed a remuneration of 7,000. Deepa agreed to bear dissolution expenses. Actual
dissolution expenses 6,000 were paid from the firm's bank account.
d Dev, a partner, agreed to do the work of dissolution for 7,500. He took away stock of the same amount as his commission. The stock had already been transferred to
Realisation Account.
e Jeev, a partner, agreed to do the work of dissolution for which he was allowed a commission of 10,000. He agreed to bear the dissolution expenses. Actual dissolution
expenses paid by Jeev were 12,000. These expenses were paid by Jeev by drawing cash from the firm.
f A debtor of 8,000 already transferred to Realisation Account agreed to pay the realisation expenses of 7,800 in full settlement of his account.
Solution:
Journal
Debit Credit
Date Particulars L.F. Amount Amount

a Realisation A/c Dr. 12,000

To Dharam’s Capital A/c 12,000
Remunerationpaid

b Realisation A/c Dr. 15,000

To Jay's’s Capital A/c 15,000
Remunerationpaid

Jay's Capital A/c Dr. 16,000

To Vijay's Capital A/c 16,000
ExpensesbornebyJay, paidbyVijay

c Realisation A/c Dr. 7,000

To Deepa’s Capital A/c 7,000
Remunerationpaid

Deepa’s Capital A/c Dr. 6,000

To Bank A/c 6,000
Expensespaidbyfirm

d No Entry

e Realisation A/c Dr. 10,000

To Jeev's Capital A/c 10,000
Remunerationpaid

Jeev's Capital A/c Dr. 12,000

To Bank A/c 12,000
Expensespaidbyfirm

f No Entry

Question:18
Ramesh and Umesh were partners in a firm sharing profits in the ratio of their capitals. On 31st March, 2013, their Balance Sheet was as follows:

Amount Amount
Liabilities Assets

Creditors 1,70,000 Bank 1,10,000

Workmen Compensation Reserve 2,10,000 Debtors 2,40,000
General Reserve 2,00,000 Stock 1,30,000
Ramesh's Current Account 80,000 Furniture 2,00,000
 Capital A/cs: Machinery 9,30,000
Ramesh 7,00,000 Umesh's Current Account 50,000
Umesh 3,00,000 10,00,000

16,60,000 16,60,000

On the above date the firm was dissolved.

a Ramesh took over 50% of stock at 10,000 less than book value. The remaining stock was sold at a loss of 15,000. Debtors were realised at a discount of 5%.
b Furniture was taken over by Umesh for 50,000 and machinery was sold for 4,50,000.
c Creditors were paid in full.
d There was an unrecorded bill for repairs for 1,60,000 which was settled at 1,40,000.
Prepare Realisation Account.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Sundry Assets- Creditors 1,70,000
Ramesh’s Current A/c
Debtors 2,40,000 55,000
Stock
Cash A/c
Stock 1,30,000
AssetsRealised
Furniture 2,00,000 Stock 50,000
Machinery 9,30,000 15,00,000 Machinery 4,50,000
Debtors 2,28,000 7,28,000
Umesh’s Current A/c
To Cash A/c Liabilities 50,000
Furniture
Creditors 1,70,000
Outstanding Bill 1,40,000 3,10,000 Realisation Loss

Ramesh’s
5,64,900
Current
A/c
Umesh’s
Current 2,42,100 8,07,000
A/c
18,10,000 18,10,000

Question:19
Pradeep and Rajesh were partners in a firm sharing profits and losses in the ratio of 3 : 2. They decided to dissolve their partnership firm on 31st March, 2018. Pradeep was
deputed to realise the assets and to pay off the liabilities. He was paid 1,000 as commission for his services. The financial position of the firm on 31st March, 2018 was as
follows:

BALANCE SHEET as at 31st March, 2018

Amount Amount
Liabilities Assets

Creditors 80,000 Building 1,20,000

Mrs. Pradeep's Loan 40,000 Investment 30,600
Rajesh's Loan 24,000 Debtors 34,000
Investment Fluctuation Fund 8,000 Less: Provision for Doubtful Debts 4,000 30,000
Capital A/cs: Bills Receivable 37,400
Pradeep 42,000 Bank 6,000
Rajesh 42,000 84,000 Profit and Loss A/c 8,000
Goodwill 4,000
2,36,000 2,36,000

Following terms and conditions were agreed upon:

a Pradeep agreed to pay off his wife's loan.
b Half of the debtors realised 12,000 and remaining debtors were used to pay off 25% of the creditors.
c Investment sold to Rajesh for 27,000.
d Building realised 1,52,000.
e Remaining creditors were to be paid after two months, they were paid immediately at 10% p.a. discount.
f Bill receivables were settled at a loss of 1,400.
g Realisation expenses amounted to 2,500.
​P repare Realisation Account.
Solution:
Dr. Realisation A/c Cr.
Amount Amount
Particulars Particulars
( ) ( )
To Building 1,20,000 By Provision for Doubtful Debts 4,000
To Investments 30,600 By Creditors 80,000
To Debtors 34,000 By Mrs. Pradeep’s Loan 40,000
To Bills Receivable 37,400 By Investment Fluctuation Fund 8,000
To Goodwill 4,000
To Pradeep’s Capital A/c Wifeloanpaid 40,000 By Bank A/c:
To Cash A/c CreditorsPaid WN1 59,000 Debtors 12,000
To Pradeep’s Capital A/c Commission 1,000 Building 1,52,000
To Cash A/c RealisationExpenses 2,500 Bills Receivable 36,000 2,00,000
To Profit transferred to:
Pradeep’s Capital A/c 18,300 By Cash A/c SaleofInvestments 27,000
Rajesh’s Capital A/c 12,200 30,500

3,59,000 3,59,000
 Working Notes:
Remaining Creditors to be paid = 80, 000 × 75/100 = 60,000
Discount Received on Creditors = 60, 000 × 10/100 × 2/12 = 1,000
Amount paid to the Creditors = 60, 000– 1, 000 = 59,000

Question:20
Balance Sheet of a firm as at 31st March, 2019, when it was decided to dissolve the same, was:

Amount Amount
Liabilities Assets

Sundry Creditors 14,000 Cash at Bank 640

General Reserve 500 Stock 4,740
Capital A/cs: Debtors 5,540
X 4,000 Machinery 10,580
Y 3,000 7,000

21,500 21,500

19,500 were realised from all assets except Cash at Bank. The cost of winding up came to 440. X and Y shared profits in the ratio of 2 : 1 respectively.
Prepare Realisation Account and Capital Accounts of Partners.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars

Machinery 10,580 Sundry Creditors 14,000

Stock 4,740 Bank AssetsRealised 19,500
Debtors 5,540
Bank A/c: Loss transferred to:
Creditors 14,000 X’s Capital A/c 1,200
Expenses 440 14,440 Y’s Capital A/c 600 1,800

35,300 35,300

Partners’ Capital Accounts

Dr. Cr.
Particulars X Y Particulars X Y
Realisation A/c Loss 1,200 600 Balance b/d 4,000 3,000
Reserve for Contingencies 333 167
Bank A/c 3,133 2,567
4,333 3,167 4,333 3,167

Bank Account
Dr. Cr.
Amount Amount
Particulars Particulars

Balance b/d 640 Realisation A/c 14,440

Realisation A/c 19,500 X’s Capital A/c 3,133
Y’s Capital A/c 2,567
20,140 20,140

Question:21
Achal and Vichal were partners in a firm sharing profits in the ratio of 3 : 5. On 31st March, 2019, their Balance Sheet was as follows:

Liabilities Amount Assets Amount

Capital A/cs: Land and Building 4,00,000
Achal 3,00,000 Machinery 3,00,000
Vichal 5,00,000 8,00,000 Debtors 2,22,000
Creditors 1,79,000 Cash at Bank 78,000
Employees' Provident Fund 21,000
10,00,000 10,00,000

The firm was dissolved on 1st April, 2019 and the Assets and Liabilities were settled as follows:
a Land and Building realised 4,30,000.
b Debtors realised 2,25,000 withinterest and 1,000 were recovered for Bad Debts written off last year.
c There was an Unrecorded Investment which was sold for 25,000.
d Vichal took over Machinery at 2,80,000 for cash.
e 50% of the Creditors were paid 4,000 less in full settlement and the remaining Creditors were paid full amount.
Pass necessary Journal entries for dissolution of the firm.
Solution:
Journal
Debit Credit
Date Particulars L.F. Amount Amount

2019
Apr.1 Realisation A/c Dr. 9,22,000
To Land & Building A/c 4,00,000
To Machinery A/c 3,00,000
 To Debtors A/c 2,22,000
Beingassetstransferred

Apr.1 Creditors A/c Dr. 1,79,000

Employees’ Provident Fund A/c Dr. 21,000
To Realisation A/c 2,00,000
Beingliabilitiestransferred

Apr.1 Bank A/c Dr. 4,30,000

To Realisation A/c 4,30,000
Being Land & Building realised

Apr.1 Bank A/c 2, 25, 000 + 1, 000 Dr. 2,26,000

To Realisation A/c 2,26,000
BeingDebtorsrealisedalong − withBad − debtsrecovered

Apr.1 Bank A/c Dr. 25,000

To Realisation A/c 25,000
BeingUnrecordedInvestmentssold

Apr.1 Bank A/c Dr. 2,80,000

To Realisation A/c 2,80,000
BeingMachinerytookoverbyVichalforCash

Apr.1 Realisation A/c Dr. 1,96,000

To Bank A/c 85, 500 + 89, 500 + 21, 000 1,96,000
Being50

Apr.1 Realisation A/c Dr. 43,000

To Achal’s Capital A/c 16,125
To Vichal’s Capital A/c 26,875
Beingprofitsonrealisationtransferred

Apr.1 Achal’s Capital A/c Dr. 3,16,125

Vichal’s Capital A/c Dr. 5,26,875
To Bank A/c 8,43,000
BeingPartnerspaidoff

Question:22
Bale and Yale are equal partners of a firm. They decide to dissolve their partnership on 31st March, 2019 at which date their Balance Sheet stood as:

Liabilities Assets
Capital A/cs: Building 45,000
Bale 50,000 Machinery 15,000
Yale 40,000 90,000 Furniture 12,000
General Reserve 8,000 Debtors 8,000
Bale's Loan A/c 3,000 Stock 24,000
Creditors 14,000 Bank 11,000

1,15,000 1,15,000

a The assets realised were:

Stock 22,000; Debtors 7,500; Machinery 16,000; Building 35,000.
b Yale took over the Furniture at 9,000.
c Bale agreed to accept 2,500 in full settlement of his Loan Account.
d Dissolution Expenses amounted to 2,500.
Prepare the:
i Realisation Account; ii Capital Accounts of Partners;
iii Bale's Loan Account; iv Bank Account.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars

Building 45,000 Creditors 14,000

Machinery 15,000 Bank A/c:
Furniture 12,000 Stock 22,000
Debtors 8,000 Debtors 7,500
Stock 24,000 Machinery 16,000
Building 35,000 80,500
Bank A/c:
Creditors 14,000 Bale’s Loan 500
Expenses 2,500 16,500 Yale’s Capital A/c Furniture 9,000
Loss transferred to:
Bale’s Capital A/c 8,250
Yale’s Capital A/c 8,250 16,500
1,20,500 1,20,500
 Partners’ Capital Accounts
Dr. Cr.
Particulars Bale Yale Particulars Bale Yale
Realisation A/c Loss 8,250 8,250 Balance b/d 50,000 40,000
Realisation A/c – 9,000 General Reserve 4,000 4,000
OldRatio
Bank A/c 45,750 26,750

54,000 44,000 54,000 44,000

Bale’s Loan Account

Dr. Cr.
Amount Amount
Particulars Particulars

Bank A/c 2,500 Balance b/d 3,000

Realisation A/c 500

3,000 3,000

Bank Account
Dr. Cr.
Amount Amount
Particulars Particulars

Balance 11,000 Bale’s Loan 2,500

b/d
Realisation 80,500 Realisation A/c 16,500
A/c
Bale’s Capital A/c 45,750
Yale’s Capital A/c 26,750

91,500 91,500

Question:23
Shilpa, Meena and Nanda decided to dissolve their partnership on 31st March, 2019. Their profit-sharing ratio was 3 : 2 : 1 and their Balance Sheet was as under:

BALANCE SHEET OF SHILPA, MEENA AND NANDA as at 31st March, 2019

Liabilities Assets
Capital A/cs: Land 81,000
Shilpa 80,000 Stock 56,760
Meena 40,000 1,20,000 Debtors 18,600
Bank Loan 20,000 Nanda's Capital 23,000
Creditors 37,000 Cash 10,840
Provision For Doubtful Debts 1,200
General Reserve 12,000

1,90,200 1,90,200

It is agreed as follows:
The stock of value of 41,660 are taken over by Shilpa for 35,000 and she agreed to discharge bank loan. The remaining stock was sold at 14,000 and debtors amounting to
10,000 realised 8,000. Land is sold for 1,10,000. The remaining debtors realised 50% at their book value. Cost of realisation amounted to 1,200. There was a typewriter not
recorded in the books worth of 6,000 which were taken over by one of the Creditors at this value. Prepare Realisation Account, Partners' Capital Accounts, and Cash Account to
Close the books of the firm.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars

Land 81,000 Bank Loan 20,000

Stock 56,760 Creditors 37000
Debtors 18,600 Provision for doubtful 1,200
debts
Shilpa’s Capital A/c 20,000 Shilpa’s Capital A/c Stock 35,000
Cash: Cash:
Creditors 31000 Stock 14000
Realisation 1,200 32200 Debtors 12300
Expenses
Realisation Profit Land 1,10,000 1,36,300
Shilpa’s Capital A/c 10,470
Meena’s Capital A/c 6,980
Nanda’s Capital A/c 3,490 20,940
2,29,500 2,29,500

Partners’ Capital Account

Dr. Cr.
Particulars Shilpa Meena Nanda Particulars Shilpa Meena Nanda
Balance b/d – – 23,000 Balance b/d 80,000 40,000 –
Realisation 35,000 General Reserve 6,000 4,000 2,000
Stock Realisation 20,000
Cash 81,470 50,980 BankLoan
Realisation Profit 10,470 6,980 3,490
 Cash 17,510
1,16,470 50,980 23,000 1,16,470 50,980 23,000

Cash Account
Dr. Cr.
Amount Amount
Particulars Particulars

Balance b/d 10,840 Realisation Expenses 32,200

Realisation Assets 1,36,300 Shilpa’s Capital A/c 81,470
Nanda’s Capital A/c 17,510 Meena’s Capital A/c 50,980

1,64,650 1,64,650

Question:24
A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 31st March, 2019, their Balance Sheet was as follows:

BALANCE SHEET as at 31st March, 2019

Amount Amount
Liabilities Assets

Creditors 38,000 Cash at Bank 11,500

Mrs. A's Loan 10,000 Stock 6,000
B's Loan 15,000 Debtors 19,000
Reserve 5,000 Furniture 4,000
A's Capital 10,000 Plant 28,000
B's Capital 8,000 18,000 Investments 10,000
Profit and 7,500
LossA/C

86,000 86,000

The firm was dissolved on 31st March, 2019 and both the partners agreed to the following:
a A took Investments at an agreed value of 8,000. He also agreed to settle Mrs. A's Loan.
b Other assets realised as: Stock − 5,000; Debtors − 18,500; Furniture − 4,500; Plant − 25,000.
c Expenses of realisation came to 1,600.
d Creditors agreed to accept 37,000 in full settlement of their claims.
Prepare Realisation Account, Partners' Capital Accounts and Bank Account.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars

Stock 6,000 Creditors 38,000

Debtors 19,000 Mrs. A’s Loan 10,000
Furniture 4,000
Plant 28,000 A’s Capital A/c Investments 8,000
Investments 10,000 Bank A/c:
A’s Capital A/c Mrs. A ′sloan 10,000 Stock 5,000
Bank A/c : Debtors 18,500
Expenses 1,600 Furniture 4,500
Creditors 37,000 38,600 Plant 25,000 53,000
Loss transferred to:
A’s Capital A/c 3,960
B’s Capital A/c 2,640 6,600
1,15,600 1,15,600

Partners’ Capital Accounts

Dr. Cr.
Particulars A B Particulars A B
Realisation loss 3,960 2,640 Balance b/d 10,000 8,000
Realisation A/c 8,000 – Reserve A/c 3,000 2,000
Profit and Loss A/c 4,500 3,000 Realisation A/c 10,000 –
Bank A/c 6,540 4,360
23,000 10,000 23,000 10,000

B’s Loan Account

Dr. Cr.
Amount Amount
Particulars Particulars

Balance b/d 15,000

Bank A/c 15,000

15,000 15,000

Bank Account
Dr. Cr.
Amount Amount
Particulars Particulars

Balance b/d 11,500 Realisation A/c 38,600

 Realisation
53,000 A’s Capital A/c 6,540
A/c
B’s Capital A/c 4,360
B’s Loan A/c 15,000
64,500 64,500

Question:25
Balance Sheet of P, Q and R as at 31st March, 2019, who were sharing profits in the ratio of 5 : 3 : 1, was:

Amount Amount
Liabilities Assets

Bills Payable 40,000 Cash at Bank 40,000

Loan from Bank 30,000 Stock 19,000
General Reserve 9,000 Sundry Debtors 42,000
Capital A/cs: Less: Provision for Doubtful Debts 2,000 40,000
P 44,000
Q 36,000 Building 40,000
R 20,000 1,00,000 Plant and Machinery 40,000

1,79,000 1,79,000

The partners dissolved the business. Assets realised − Stock 23,400; Debtors 50%; Fixed Assets 10% less than their book value. Bills Payable were settled for 32,000. There
was an Outstanding Bill of Electricity 800 which was paid off. Realisation expenses 1,250 were also paid.
Prepare Realisation Account, Partner's Capital Accounts and Bank Account.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars

Building 40,000 Provision for Doubtful Debts 2,000

Plant and machinery 40,000 Bills Payable 40,000
Stock 19,000 Loan from Bank 30,000
Sundry Debtors 42,000
Bank A/c: Bank A/c:
Bills Payable 32,000 Stock 23,400
Outstanding Bill 800 Debtors 21,000
Expenses 1,250 Building 36,000
Loan from Bank 30,000 64,050 Plant and Machinery 36,000 1,16,400
Loss transferred to:
P’s Capital A/c 9,250
Q’s Capital A/c 5,550
RCapital A/c 1,850 16,650
2,05,050 2,05,050

Partners’ Capital Accounts

Dr. Cr.
Particulars P Q R Particulars P Q R
Realisation 9,250 5,550 1,850 Balance 44,000 36,000 20,000
A/c Loss b/d
Reserve 5,000 3,000 1,000
Fund
Bank A/c 39,750 33,450 19,150
49,000 39,000 21,000 49,000 39,000 21,000

Bank Account
Dr. Cr.
Amount Amount
Particulars Particulars

Balance b/d 40,000 Realisation A/c 64,050

Realisation
1,16,400 P’s Capital A/c 39,750
A/c
Q’s Capital A/c 33,450
R’s Capital A/c 19,150
1,56,400 1,56,400

Question:26
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:

Amount Amount
Liabilities Assets

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.
Solution:
Realisation Account
Dr. Cr.
Particulars Amount Particulars Amount

Stock 19,800 Provision for Doubtful Debts 1,000

Debtors 15,000 Creditors 17,000
Investments 4,000 Bills Payable 12,000
Furniture 10,000 Vinod's Loan 5,300
Investmentstakenover
Machinery 33,000 Bank A/c:
Bank Expenses 2,000 Stock 17,500
Bank Creditors 17,000 Debtors 14,500
Bank BillsPayable 12,000 Furniture 6,800
Machinery 30,300 69,100
Loss on Realisation
transferred to:
Vinod 4,200
Vijay 2,800
Venkat 1,400 8,400
1,12,800 1,12,800

Partners’ Capital Account

Dr. Cr.
Particulars Vinod Vijay Venkat Particulars Vinod Vijay Venkat
Balance
25,000 11,000 8,000
b/d
Realisation General
4,200 2,800 1,400 3,000 2,000 1,000
A/c Loss Reserve
Bank A/c 23,800 10,200 7,600
28,000 13,000 9,000 28,000 13,000 9,000

Vinod’s Loan A/c

Dr. Cr.
Particulars Amount Particulars Amount

Realisation A/c 5,300 Balance b/d 5,300

5,300 5,300

Bank A/c
Dr. Cr.
Particulars Amount Particulars Amount

Balance b/d 3,500 Realisation A/c Expenses 2,000

Realisation A/c 69,100 Realisation A/c Creditors 17,000
Assetsrealised Realisation A/c 12,000
BillsPayable
Vinod's Capital A/c 23,800
Vijay’s Capital A/c 10,200
Venkat’s Capital A/c 7,600
72,600 72,600

Question:27
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

Amount Amount
Liabilities Assets

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.
Solution:
 Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars

Plant and Machinery 30,000 Creditors 10,000

Stock 5,500 Bills Payable 3,700
Investments Fluctuation
Investments 15,000 4,500
Reserve
Debtors 7,100 Provision for Doubtful Debts 450
Cash A/c: P’s Capital A/c Investments 12,500
Creditors 10,000 Cash A/c:
Bills
3,700 Stock and Debtors 11,500
Payable
Expenses 900 14,600 Plant and Machinery 22,500
P’s Capital A/c 1,000 Unrecorded Assets 1,500 35,500
Loss transferred to:
P’s Capital A/c 3,275
Q’s Capital A/c 1,965
R’s Capital A/c 1,310 6,550
73,200 73,200

Partners’ Capital Accounts

Dr. Cr.
Particulars P Q R Particulars P Q R
Balance b/d – – 8,000 Balance b/d 37,550 15,000 –
Realisation Loss 3,275 1,965 1,310 Realisation A/c 1,000 – –
Realisation A/c
12,500
Investments
Cash A/c 22,775 13,035 – Cash A/c – – 9,310
38,500 15,000 9,310 38,550 15,000 9,310

Cash Account
Dr. Cr.
Amount Amount
Particulars Particulars

Balance b/d 5,600 Realisation A/c 14,600

Realisation
35,500 P’s Capital A/c 22,775
A/c
R’s Capital
9,310 Q’s Capital A/c 13,035
A/c

50,410 50,410

Question:28
Ashu and Harish are partners sharing profit and losses as 3 : 2 . They decided to dissolve the firm on 31st March, 2019. Their Balance Sheet on the above date was:

Amount Amount
Liabilities Assets
​
Capital A/cs: Building 80,000
Ashu 1,08,000 Machinery 70,000
Harish 54,000 1,62,000 Furniture 14,000
Creditors 88,000 Stock 20,000
Bank Overdraft 50,000 Investments 60,000
Debtors 48,000
Cash in Hand 8,000

3,00,000 3,00,000

Ashu is to take over the building at 95,000 and Machinery and Furniture is taken over by Harish at value of 80,000. Ashu agreed to pay Creditor and Harish agreed to meet
Bank overdraft. Stock and Investments are taken by both partner in profit-sharing ratio. Debtors realised for 46,000, expenses of realisation amounted to 3,000. Prepare
necessary Ledger Accounts.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars

Building 80,000 Creditors 88,000

Machinery 70,000 Bank overdraft 50,000
Furniture 14,000 Ashu’s Capital A/c (see working note) 1,43,000
Stock 20,000 Harish’s Capital A/c (see working note) 1,12,000
Investments 60,000 Cash Debtors 46,000
Debtors 48,000
Ashu’s Capital A/c Creditors 88,000
Harish’s Capital A/c BankOverdraft 50,000
Cash Expenses 3,000
Realisation Profit
Ashu’s Capital A/c 3,600
Harish’s Capital A/c 2,400 6,000
4,39,000 4,39,000

Partners’ Capital Account

Dr. Cr.
 Particulars Ashu Harish Particulars Ashu Harish
Realisation Assetstaken 1,43,000 1,12,000 Balance b/d 1,08,000 54,000
Cash 56,600 Realisation 88,000 50,000
Liabilities
Realisation 3,600 2,400
Profit
Cash 5,600
1,99,600 1,12,000 1,99,600 1,12,000

Cash Account
Dr. Cr.
Amount Amount
Particulars Particulars
Balance b/d 8,000 Realisation Expenses 3,000
Realisation Debtors 46,000 Ashu’s Capital A/c 56,600
Harish’s Capital 5,600
A/c
59,600 59,600

Working Notes :

Ashu Harish
Building 95,000
Machinery and 80,000
Furniture
Stock 3: 2 12,000 8,000
Investment 3: 2 36,000 24,000
1,43,000 1,12,000

Question:29
A, B and C were equal partners. On 31st March, 2019, their Balance Sheet stood as:

Amount Amount
Liabilities Assets

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.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars

Stock 20,100 Creditors 50,400

Debtors 62,600
Investments 16,000 A’s Capital A/c Investments 18,000
Furniture 6,500 Cash A/c:
Building 23,500 Furniture and Building 29,700
Cash A/c: Stock and Debtors 80,000 1,09,700
Expenses 1,300
Creditors 49,600
Bills 1,500 52,400 Loss transferred to :
A’s Capital A/c 1,000
B’s Capital A/c 1,000
C’s Capital A/c 1,000 3,000

1,81,100 1,81,100

Partners’ Capital Accounts

Dr. Cr.
Particulars A B C Particulars A B C
Realisation A/c 18,000 – – Balance b/d 40,000 25,000 15,000
Investment
Realisation A/c 1,000 1,000 1,000 Reserve 4,000 4,000 4,000
Loss
Cash A/c 25,000 28,000 18,000
 44,000 29,000 19,000 44,000 29,000 19,000

A’s Loan A/c

Dr. Cr.
Particulars Amount Particulars Amount
( ) ( )
Balance b/d 10,000 Bank A/c 10,000

10,000 10,000

Cash Account
Dr. Cr.
Amount Amount
Particulars Particulars

Balance b/d 3,700 Realisation A/c 52,400

Realisation
1,09,700 A’s Capital A/c 25,000
A/c
A's Loan A/c 10,000 B’s Capital A/c 28,000
C’s Capital A/c 18,000
1,23,400 1,23,400

Question:30
Yogesh and Naresh were partners sharing profits equally. They dissolved the firm on 1st April, 2019. Naresh was assigned the responsibility to realise the assets and pay the
liabilities at a remuneration of 10,000 including expenses. Balance Sheet of the firm as on that date was as follows:
Amount Amount
Liabilities Assets

Creditors 40,000 Cash/Bank 6,000

Bills Payable 40,000 Investments 30,000

Naresh's Loan 44,000 Debtors 40,000

Mrs. Yogesh's Loan 42,000 Less: Provision for Doubtful Debts 4,000 36,000
Investment Fluctuation Reserve 8,000 Bills Receivable 33,400
Capital A/cs: Profit and Loss A/c 1,10,600
Yogesh 21,000
Naresh 21,000 42,000

2,16,000 2,16,000

The firm was dissolved on following terms:

a Yogesh was to pay his wife's loan.
b Debtors realised 30,000.
c Naresh was to take investments at an agreed value of 26,000.
d Creditors and Bills Payable were payable after two months but were paid immediately at a discount of 15% p.a.
e Bills Receivable were received allowing 5% rebate.
f A Debtor previously written off as Bad Debt paid 15,000.
g An unrecorded asset realised 10,000.
Prepare Realisation Account, Partners' Capital Accounts, Partners' Loan Account and Cash/Bank Account.
Solution:
Dr. Realisation A/c Cr.
Amount Amount
Particulars Particulars
( ) ( )
To Investments 30,000 By Investment Fluctuation Reserve 8,000
To Debtors 40,000 By Provision for Doubtful Debts 4,000
To Bills Receivable 33,400 By Creditors 40,000
By Bills Payable 40,000
To Yogesh’s Capital A/c Wife′sLoan 42,000 By Mrs. Yogesh’s Loan 42,000
To Cash/Bank A/c:
Creditors 39,000 By Cash/Bank A/c:

40, 000– (40, 000 × 15/100 × 2/12)

Bills Payable 39,000 78,000 Debtors 30,000

40, 000– (40, 000 × 15/100 × 2/12)

Bills Receivable 31,730
To Naresh’ Capital A/c Commission 10,000 Bad Debt Recovered 15,000
To Realisation Gain transferred to: Unrecorded Asset 10,000 86,730
Yogesh’s Capital A/c 6,665
Naresh’s Capital A/c 6,665 13,330 By Naresh’s Capital A/c Investmenttakenover 26,000

2,46,730 2,46,730

Dr. Partner’s Capital A/c Cr.

Yogesh Naresh Yogesh Naresh
Particulars Particulars
( ) ( ) ( ) ( )
To Realisation A/ c Assettakenover 26,000 By balance b/d 21,000 21,000
By Realisation A/c Gain 6,665 6,665
To Profit & Loss A/c 55,300 55,300 By Realisation A/c Liabilitypaid 42,000
To Cash/Bank A/c 14,365 –
By Realisation A/c 10,000
Commission
By Naresh’s Loan A/c 43,635
 69,665 81,300 69,665 81,300

Dr. Naresh’s Loan A/c Cr.

Amount Amount
Particulars Particulars
( ) ( )
To Naresh’s Capital A/c 43,635 By balance b/d 44,000
To Cash/Bank A/c 365

44,000 44,000

Dr. Cash/ Bank A/c Cr.

Amount Amount
Particulars Particulars
( ) ( )
To balance b/d 6,000 By Yogesh’s Capital A/c 14,365
To Realisation A/c AssetRealised 86,730 By Naresh’s Loan A/c 365
By Realisation A/c LiabilitiesPaid 78,000

92,730 92,730

Question:31
A, B and C are in partnership sharing profits and losses in the proportions of 1/2, 1/3 and 1/6 respectively. On 31st March, 2019, they decided to dissolve the partnership and the
position of the firm on this date is represented by the following Balance Sheet:

Amount Amount
Liabilities Assets
​
Creditors 40,000 Cash at Bank 3,000
Loan A/c: Stock 50,000
A 10,000 Sundry Debtors 50,000
Workmen Compensation Reserve 21,000 Land and Building 57,000
Capital A/cs: Profit and Loss A/c 15,000
A 60,000 Advertisement Suspense A/c 6,000
B 40,000
C 10,000 1,10,000
1,81,000 1,81,000

During the course of realisation, a liability under a suit for damages is settled at 20,000 as against 5,000 only provided for in the books of the firm.
Land and Building were sold for 40,000 and the Stock and Sundry Debtors realised 30,000 and 42,000 respectively. The expenses of realisation amounted to 1,200.
There was a car in the firm, which was completely written off from the books. It was taken by A for 20,000. He also agreed to pay Outstanding Salary of 20,000 not provided in
books.
Prepare Realisation Account, Partners' Capital Accounts and Bank Account in the books of the firm.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars

Land and Building 57,000 Creditors 40,000

Stock 50,000 Bank
Sundry Debtors 50,000 Land and building 40,000
Stock 30,000
Bank A/c: Sundry Debtors 42,000 1,12,000

Creditors 40, 000 + 15, 000 55,000

Expenses 1,200 56,200 Loss transferred to:
A’s Capital A/c 30,600
B’s Capital A/c 20,400
C’s Capital A/c 10,200 61,200
2,13,200 2,13,200

Partners’ Capital Accounts

Dr. Cr.
Particulars A B C Particulars A B C
Profit and Balance b/d 60,000 40,000 10,000
Loss A/c 7,500 5,000 2,500 Workmen
Advertisement Compensation
3,000 2,000 1,000
Suspense A/c Reserve A/c ​ 10,500 7,000 3,500
Realisation Bank A/c ------ ------ 200
30,600 20,400 10,200
A/c Loss
Bank A/c 29,400 19,600 -------

70,500 47,000 13,700 70,500 47,000 13,700

A’s Loan Account

Dr. Cr.
Amount Amount
Particulars Particulars

Bank A/c 10,000 Balance b/d 10,000

10,000 10,000
 Bank Account
Dr. Cr.
Amount Amount
Particulars Particulars

A’s Loan A/c 10,000

Balance b/d 3,000
Realisation A/c 56,200
Realisation
1,12,000 A’s Capital A/c 29,400
A/c
C’s Capital
200 B’s Capital A/c 19,600
A/c

1,15,200 1,15,200

Question:32
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:

Amount Amount
Liabilities Assets

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.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars

Sundry Debtors 26,000 Provision for Doubtful Debts 2,000

Investments 40,000 Bank Overdraft 30,000
Stock 10,000 Investments Fluctuation Reserve 20,000
Furniture 10,000
Building 60,000 A’s Capital A/c Investments 35,000
Bank A/c: Bank A/c:
Compensation to 10,000
Sundry Debtors 26,000
Employees
Bank Overdraft 30,000 40,000 Stock 8,500
Profit transferred to: Furniture 8,000
A’s Capital A/c 29,000 Building 1,00,000 1,42,500
B’s Capital A/c 14,500 43,500
2,29,500 2,29,500

Partners’ Capital Accounts

Dr. Cr.
Particulars A B Particulars A B
Balance b/d – 30,000 Balance b/d 50,000 –
Realisation A/c 35,000 General Reserve 37,333 18,667
Investment A/c
Bank A/c 81,333 3,167 Realisation A/c 29,000 14,500
Profit

1,16,333 33,167 1,16,333 33,167

A’s Loan Account

Dr. Cr.
Amount Amount
Particulars Particulars

Balance b/d 34,000

Bank A/c 34,000
34,000 34,000

Bank Account
Dr. Cr.
Amount Amount
Particulars Particulars

Balance b/d 10,000 Realisation A/c 40,000

Cash A/c 6,000 A’s Capital A/c 81,333
Realisation A/c 1,42,500 B’s Capital A/c 3,167
A’s Loan A/c 34,000
 1,58,500 1,58,500

Question:33
Ashok, Babu and Chetan are in partnership sharing profit in the proportion of 1/2, 1/3, 1/6 respectively. They dissolve the partnership of the 31st March, 2019 when the Balance
Sheet of the firm as under:

Amount Amount
Liabilities Assets

Sundry Creditors 20,000 Bank 7,500

Bills Payable 25,500 Sundry Debtors 58,000
Babu's Loan 30,000 Stock 39,500
Capital A/cs: Machinery 48,000
Ashok 70,000 Investments 42,000
Babu 55,000 Freehold Property 50,500
Chetan 27,000 1,52,000
Current A/cs:
Ashok 10,000
Babu 5,000
Chetan 3,000 18,000

2,45,500 2,45,500

The Machinery was taken over by Babu for 45,000, Ashok took over the Investments for 40,000 and Freehold property took over by Chetan at 55,000. The remaining Assets
realised as follows:
Sundry Debtors 56,500 and Stock 36,500. Sundry Creditors were settled at discount of 7%. A Office computer, not shown in the books of accounts realised 9,000. Realisation
expenses amounted to 3,000.
Prepare Realisation Account, Partners' Capital Accounts and Bank Account.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars

Sundry Debtors 58,000Sundry Creditors 20,000

Stock 39,500Bills Payable 25,500
Machinery 48,000Ashok’s Current A/c Investment 40,000
Investment 42,000Babu’s Current A/c Machinery 45,000
Freehold property 50,500Chetan’s Current A/c 55,000
Bank: Freeholdproperty
Sundry Creditors 18,600 Bank:
Bills Payable 25,500 Sundry Debtors 56,500
Expenses 3,000 47,100 Stock 36,500
Realisation Profit Unrecorded Computer 9,000 1,02,000

Ashok’s Current A/c 1,200

Babu’s Current A/c 800
Chetan’s Current A/c 400 2,400

2,87,500 2,87,500

Partners' Current Account

Dr. Cr.

Particulars Ashok Babu Chetan Particulars Ashok Babu Chetan

Realisation 40,000 45,000 55,000 Balance b/d 10,000 5,000 3,000
Assetstaken Realisation Profit 1,200 800 400
Ashok's Capital A/c 28,800
Babu's Capital A/c 39200
Chetan's Capital A/c 51600

40,000 45,000 55,000 40,000 45,000 55,000

Partners' Capital Account

Dr. Cr.
Particulars Ashok Babu Chetan Particulars Ashok Babu Chetan
Ashok's Current A/c 28,800 Balance 70,000 55,000 27,000
b/d
Babu's Current A/c 39200 Bank A/c 24,600
Chetan's Current A/c 51600
Bank A/c 41,200 15,800

70,000 55,000 51,600 70,000 55,000 51,600

Babu’s Loan A/c

Dr. Cr.
Amount Amount
Particulars Particulars

Bank A/c 30,000 Balance b/d 30,000

30,000 30,000
 Bank Account
Dr. Cr.
Amount Amount
Particulars Particulars

Balance b/d 7,500 Realisation A/c 47,100

Payment of Expenses& Liabilities
Realisation A/c Assetsrealised 102,000 and Liabilities)
Chetan’s Capital A/c 24,600 Babu’s Loan 30,000
Ashok’s Capital A/c 41,200
Babu’s Capital A/c 15,800

1,34,100 1,34,100

Question:34
X, Y and Z carrying on business as merchants and sharing profits and losses in the ratio of 2 : 2 : 1, dissolved their firm as at 31st March, 2019 on which date their Balance Sheet
was as follows:

Amount Amount
Liabilities Assets
​
Sundry Creditors 41,500 Cash at Bank 22,500
Bills Payable 20,000 Stock 80,000
Bank Loan 40,000 Debtors 50,000
General Reserve 50,000 Less: Provision for Doubtful Debts 2,500 47,500
Investments Fluctuation Reserve 40,000 Investments 55,000
Capital A/cs: Premises 1,51,500
X 75,000
Y 75,000
Z 15,000 1,65,000

3,56,500 3,56,500

A bill for 5,000 received from Mohan discounted from bank is not met on maturity.
The assets except Cash at Bank and Investments were sold to a company which paid 3,25,000 in cash.The Investments were sold and 56,500 were received. Mohan proved
insolvent and a dividend of 50% was received from his estate. Sundry Creditors includingBillsPayable were paid 57,500 in full settlement. Realisation Expenses amounted to
15,000.
Prepare Realisation Account, Partners' Capital Accounts and Bank Account.
Solution:
Realisation Account
Dr. Cr.
Particulars Amount Particulars Amount

Stock 80,000 Creditors 41,500

Debtors 50,000 Bills Payable 20,000
Investment 55,000 Bank Loan 40,000
Premises 1,51,500 Investment Fluctuation Reserve 40,000
Bank A/c :- Provision for Doubtful Debts 2,500
Bill 5,000 Bank A/c-
Creditors & Bills Payable 57,500 Assets 3,25,000
Expenses 15,000 Investments 56,500
Bank loan 40,000 1,17,500 Bill 2,500 3,84,000
Profit transferred to:
X’s Capital A/c 29,600
Y’s Capital A/c 29,600
Z’s Capital A/c 14,800 74,000

5,28,000 5,28,000

Partners’ Capital Accounts

Dr. Cr.
Particulars X Y Z Particulars X Y Z

Bank A/c 1,24,600 1,24,600 39,800 Balance b/d 75,000 75,000 15,000
(bal. figure) General 20,000 20,000 10,000
Reserve
Realisation 29,600 29,600 14,800
A/c
1,24,600 1,24,600 39,800 1,24,600 1,24,600 39,800

Bank Account
Dr. Cr.
Particulars Amount Particulars Amount

Balance b/d 22,500 Realisation A/c 1,17,500

Realisation A/c 3,84,000 X’s Capital A/c 1,24,600
Y’s Capital A/c 1,24,600
Z’s Capital A/c 39,800

4,06,500 4,06,500

Question:35
Rita and Sobha are partners in a firm, Fancy Garments Exports, sharing profits and losses equally. On 1st April, 2019, the Balance Sheet of the firm was:
 Amount Amount
Liabilities Assets

Sundry Creditors 75,000 Cash 6,000

Bills Payable 30,000 Bank 30,000
Rita's Loan 15,000 Stock 75,000
Reserve 24,000 Book Debts 66,000
Capital A/cs: Less: Provision for Doubtful Debts 6,000 60,000
Rita 90,000
Sobha 30,000 1,20,000 Plant and Machinery 45,000
Land and Building 48,000

2,64,000 2,64,000

The firm was dissolved on the date given above. The following transactions took place:
a Rita took 25% of the Stock at a discount of 20% in settlement of her loan.
b Book Debts realised 54,000; balance of the Stock was sold at a profit of 30% on cost.
c Sundry Creditors were paid out at a discount of 10%. Bills Payable were paid in full .
d Plant and Machinery realised 75,000. Land and Building 1,20,000.
e Rita took the goodwill of the firm at a value of 30,000.
f An unrecorded asset of 6,900 was handed over to an unrecorded liability of 6,000 in full settlement.
g Realisation expenses were 5,250.
Show Realisation Account, Partners' Capital Accounts and Bank Account in the books of the firm.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars
( ) ( )
Stock 75,000 Provision for Doubtful Debts 6,000
Book Debts 66,000 Sundry Creditors 75,000
Plant and Machinery 45,000 Bills Payable 30,000
Land and building 48,000
Rita’s Capital A/c 30,000
Goodwilltakenover
Rita’s Loan A/c
Bank A/c: 15,000
Stocktakenover
Sundry 67,500
Creditors
Bills Payable 30,000 Bank A/c:
Expenses 5,250 1,02,750 Book Debts 54,000
Profit transferred to: Stock 73,125
Rita’s Capital Plant and
70,688 75,000
A/c Machinery
Sobha’s
70,687 1,41,375 Land and Building 1,20,000 3,22,125
Capital A/c
4,78,125 4,78,125

Partners’ Capital Accounts

Dr. Cr.
Rita Sobha Rita Sobha
Particulars Particulars
( ) ( ) ( ) ( )
Realisation A/c 30,000 – Balance b/d 90,000 30,000
Assets
Reserve Fund 12,000 12,000
Bank A/c 1,42,688 1,12,687 Realisation A/c 70,688 70,687
Profit

1,72,688 1,12,687 1,72,688 1,12,687

Rita’s Loan A/c

Dr. Cr.
Particulars Amount Particulars Amount
( ) ( )
To Realisation A/c 15,000 Balance b/d 15,000

15,000 15,000

Bank Account
Dr. Cr.
Amount Amount
Particulars Particulars

Balance b/d 30,000 Realisation A/c 1,02,750

Cash A/c 6,000 Rita’s Capital A/c 1,42,688
Realisation A/c 3,22,125 Sobha’s Capital A/c 1,12,687

3,58,125 3,58,125

Working Notes:
WN1: Value of Stock Taken Over by Rita

Stock taken over by Rita=Book Value of Stock×25100×80100 [Since stock is taken over at a discount of 20%]Stock taken over by Rita= 75,000×25100×80100= 15,000

WN2: Value of Stock Sold

Book Value of Balance of Stock Sold=Value of Stock - Stock Taken over by RitaBook Value of Balance of Stock Sold= (75,000 - 18,750)= 56,250Value of Stock Sold= 56,250×

Question:36
Following is the Balance Sheet of Arvind and Balbir as at 31st March, 2019:

Amount Amount
Liabilities Assets

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.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Stock 7,500 Provision for Doubtful Debts 3,000
Investments 15,000 Trade Creditors 45,000
Book Debts 30,000 Bills Payable 12,000
Building 22,500 Mrs. Arvid’s Loan 7,500
Plant 30,000 Mrs. Balbir’s Loan 15,000
Goodwill 6,000 Investments Fluctuation Reserve 1,500
Arvind’s Capital A/c Mrs. Arvind’s 7,500 Arvind’s Capital A/c Stock 6,000
Loan
Balbir’s Capital A/c Investments
Bank A/c: 6,750
7500 × 90%
Balbir’s Capital A/c Unrecorded
Trade Creditors 44,925 450
Typewriter
Bills Payable 11,980 Bank A/c:
Expense 1,500 Book Debts 28,500
Mrs. Balbir’s Loan 15,000 73,405 Plant 37,500
Profit transferred to: Building 60,000
Arvind’s Capital A/c 23,522.50 Goodwill 9,000
Balbir’s Capital A/c 23,522.50 47,045 Investments 6,750 1,41,750

2,38,950 2,38,950

Partners’ Capital Accounts

Dr. Cr.
Particulars Arvind Balbir Particulars Arvind Balbir
Profit and 2,625 2,625 Balance b/d 15,000 15,000
Loss A/c
Realisation 6,000 7,200 Realisation A/c 7,500 –
A/c Assets
Bank A/c 44,897.50 36,197.50 Reserve Fund 7,500 7,500
Realisation A/c 23,522.50 23,522.50
Profit

53,522.50 46,022.50 53,522.50 46,022.50

Bank Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Balance b/d 12,000 Realisation A/c 73,405
Cash A/c 750 Arvind’s Capital A/c 44,897.5
Realisation A/c 1,41,750 Balbir’s Capital A/c 36,197.5

1,54,500 1,54,500
Working Notes:

Creditors 45,000
Less:2% discount for 1 month 75
Payment made to Creditors 44,925

Bills Payable 12,000

Less: 2% discount for 1 month 20
Payment made for Bills Payable 11,980

Question:37
Anju, Manju and Sanju were partners in a firm sharing profits in the ratio of 2 : 2 : 1. On 31st March, 2019, their Balance Sheet was:

Amount Amount
Liabilities Assets

Creditors 50,000 Cash 60,000

Bank Loan 35,000 Debtors 75,000
Employees' Provident Fund 15,000 Stock 40,000
Investments Fluctuation Reserve 10,000 Investments 20,000
Commission Received in Advance 8,000 Plant 50,000
Capital A/cs: Profit and Loss A/c 3,000
Anju 50,000
Manju 50,000
Sanju 30,000 1,30,000
2,48,000 2,48,000

On this date, the firm was dissolved. Anju was appointed to realise the assets. Anju was to receive 5% commission on the sale of assets except cash and was to bear all
expenses of realisation.
Anju realised the assets as follows: Debtors 60,000; Stock 35,500; Investments 16,000; Plant 90% of the book value. Expenses of Realisation amounted to 7,500.
Commission received in advance was returned to customers after deducting 3,000.
Firm had to pay 8,500 for Outstanding Salary, not provided for earlier, Compensation paid to employees amounted to 17,000. This liability was not provided for in the above
Balance Sheet. 20,000 had to be paid for Employees' Provident Fund.
Prepare Realisation Account, Capital Accounts of Partners and Cash Account.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Debtors 75,000 Creditors 50,000
Stock 40,000 Bank Loan 35,000
Investments 20,000 Provident Fund 15,000
Commission Received in
Plant 50,000 8,000
Advance
Cash A/c: Investments Fluctuation Fund 10,000
Commision
Received in 5,000 Cash A/c:
Advance
Outstanding
8,500 Debtors 60,000
Salary
Compensation
paid to 17,000 Stock 35,500
Employees
Provident
20,000 Investments 16,000
Fund
Creditors 50,000 Plant 45,000 1,56,500
Bank Loan 35,000 1,35,500 Loss transferred to:
Anuj’s Capital A/c
7,825 Anju’s Capital A/c 21,530
Commission
Manju’s Capital A/c 21,530
Sanju’s Capital A/c 10,765 53,825
3,28,325 3,28,325

Partners’ Capital Accounts

Dr. Cr.
Particulars Anju Manju Sanju Particulars Anju Manju Sanju
Profit and 1,200 1,200 600 Balance b/d 50,000 50,000 30,000
Loss A/c
Realisation 21,530 21,530 10,765 Realisation 7,825 – –
A/c A/c
Cash A/c 35,095 27,270 18,635

57,825 50,000 30,000 57,825 50,000 30,000

Cash Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Balance b/d 60,000 Realisation A/c 1,35,500
Realisation A/c 1,56,500 Anju’s Capital A/c 35,095
Manju’s Capital A/c 27,270
Sanju’s Capital A/c 18,635
 2,16,500 2,16,500

Working Notes:

WN 1

WN 2

Question:38
A, B and C were in partnership sharing profits in the ratio of 7 : 2 : 1 and the Balance Sheet of the firm as at 31st March, 2019 was:

Amount Amount
Liabilities Assets

Capital A/cs: Building 20,000

A 12,410 Plant 31,220
B 8,650 Goodwill 10,000
C 80,620 1,01,680 100 Shares in X Ltd. At cost 2,400
Creditors 11,210 1,000 Shares in Y Ltd. At cost 10,000
Reserve for Depreciation on Plant 20,000 Stock 11,240
Debtors 8,740
Bank 1,210
Patents 38,080

1,32,890 1,32,890

It was agreed to dissolve the partnership as on 31st March, 2019 and the terms of dissolution were−
a A to take over the Building at an agreed amount of 31,500.
b B, who was to carry on the business, to take over the Goodwill, Stock and Debtors at book value, the Patents at 30,000 and Plant at 5,000. He was also to pay the Creditors.
c C to take over shares in X Ltd. at 15 each.
d The shares in Y Ltd. to be divided in the profit-sharing ratio.
Show Ledger Accounts recording the dissolution in the books of the firm.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Building 20,000 Creditors 11,210
Reserve for Depreciation on
Plant 31,220 20,000
Plant
Good will 10,000 A’s Capital A/c:
100 Shares in X
2,400 Building 31,500
Ltd.
1,000 Shares in Y 10,000 Shares of Y Ltd. 7,000 38,500
Ltd.
Stock 11,240 B’s Capital A/c:
Debtors 8,740 Good will 10,000
Patents 38,080 Stock 11,240
B’s Capital A/c
11,210 Debtors 8,740
Creditors
Patents 30,000
Plant 5,000
Shares of Y Ltd. 2,000 66,980
C’s Capital:
Shares of X Ltd. 1,500
Shares of Y Ltd. 1,000 2,500
Loss transferred to:
A’s Capital A/c 2,590
B’s Capital A/c 740
C’s Capital A/c 370 3,700

1,42,890 1,42,890

Partners’ Capital Accounts

Dr. Cr.
Particulars A B C Particulars A B C
Realisation 38,500 66,980 2,500 Balance b/d 12,410 8,650 80,620
A/c Assets
Realisation 2,590 740 370 Realisation A/c – 11,210 –
A/c Loss Creditors
Bank A/c – – 77,750 Bank A/c 28,680 47,860

41,090 67,720 80,620 41,090 67,720 80,620

Bank Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Balance b/d 1,210 C’s Capital A/c 77,750
 A’s Capital
28,680
A/c
B’s Capital
47,860
A/c
77,750 77,750

Working Notes:

Distribution of Shares in Y Ltd.

Distribution of shares in Y Ltd. among the partners:A's Share = 10,000×710=Rs.7,000B's Share = 10,000×210=Rs.2,000C's Share = 10,000×110=Rs.1,000

Question:39
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 31st March, 2017

Amount Amount
Liabilities Assets

Capitals: Capital: Manan 10,000

Srijan 2,00,000 Plant 2,20,000
Raman 1,50,000 3,50,000 Investments 70,000
Creditors 75,000 Stock 50,000
Bills Payable 40,000 Debtors 60,000
Outstanding Salary 35,000 Bank 10,000
Profit and Loss Account 80,000
5,00,000 5,00,000

On the above date they decided to dissolve the firm.

a Srijan was appointed to realise the assets and discharge the liabilities. Srijan was to receive 5% commission on sale of assets except cash and was to bear all expenses of
realisation.
b
Assets were realised as
follows:
Plant 85,000
Stock 33,000
Debtors 47,000

c Investments were realised at 95% of the book value.

d The firm had to pay 7,500 for an outstanding repair bill not provided for earlier.
e A contingent liabillity in respect of bills receivable, discounted with the bank had also materialised and had to be discharged for 15,000.
f Expenses of realisation amounting to 3,000 were paid by Srijan.
Prepare Realisation Account, Partners' Capital Accounts and Bank Account.
Solution:
Dr. Realisation A/c Cr.
Amount Amount
Particulars Particulars
( ) ( )
To Plant 2,20,000 By Creditors 75,000
To Investments 70,000 By Bills Payable 40,000
To Stock 50,000 By Outstanding Salary 35,000
To Debtors 60,000

To Srijan’s Capital A/c Commission 11,575 By Bank A/c:

To Bank A/c: Investments 66,500
Outstanding Bill Repair 7,500 Plant 85,000
Contingent liability against bills payable 15,000 Stock 33,000
Creditors 75,000 Debtors 47,000 2,31,500
Bills Payable 40,000
Outstanding Salary 35,000 1,72,500 By Loss on Realisation transferred to:
Srijan’s Capital A/c 81,030
Raman’s Capital A/c 81,030
Manan’s Capital A/c 40,515 2,02,575

5,84,075 5,84,075

Dr. Partner’s Capital A/c Cr.

Srijan Raman Manan Srijan Raman Manan
Particulars Particulars
( ) ( ) ( ) ( ) ( ) ( )
To balance b/d 10,000 By balance b/d 2,00,000 1,50,000
To Realisation A/c Loss 81,030 81,030 40,515 By Realisation A/c Commission 11,575
To Profit & Loss A/c 32,000 32,000 16,000
To Bank A/c Final Payment 98,545 36,970 – By Bank A/c 66,515

2,11,575 1,50,000 66,515 2,11,575 1,50,000 66,515

Dr. Bank A/c Cr.

Amount Amount
Particulars Particulars
( ) ( )
To balance b/d 10,000 By Srijan’s Capital A/c 98,545
To Realisation A/c Asset Realised 2,31,500 By Raman’s Capital A/c 36,970
To Manan’s Capital A/c 66,515 By Realisation A/c Liabilities Paid 1,72,500

3,08,015 3,08,015
Question:40
A, B and C were partners sharing profits in the ratio of 2 : 2 : 1. They decided to dissolve their firm on 31st March, 2019 when the Balance Sheet was:

Amount Amount
Liabilities Assets

Creditors 40,000 Cash 40,000

Bills Payable 46,000 Debtors 70,000
Employees’ Provident Fund 32,000 Less: Provision for Doubtful Debts 6,000 64,000
Mrs. A’s Loan 38,000 Stock 50,000
C’s Loan 30,000 Investments 60,000
Investments Fluctuation Reserve 16,000 Furniture 42,000
Capitals A/cs: Machinery 1,36,000
A 1,20,000 Land 1,00,000
B 1,00,000 Goodwill 30,000
C 1,00,000 3,20,000

5,22,000 5,22,000

Following transactions took place:

a A took over Stock at 36,000. He also took over his wife's loan.
b B took over half of Debtors at 28,000.
c C took over Investments at 54,000 and half of Creditors at their book value.
d Remaining Debtors realised 60% of their book value. Furniture sold for 30,000; Machinery 82,000 and Land 1,20,000.
e An unrecorded asset was sold for 22,000.
f Realisation expenses amounted to 4,000.
Prepare necessary Ledger Accounts to close the books of the firm.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Debtors 70,000 Provision for Doubtful 6,000
Debts
Stock 50,000 Creditors 40,000
Investments 60,000 Bills Payable 46,000
Furniture 42,000 Employee’s Provident 32,000
Fund
Machinery 1,36,000 Investment Fluctuation 16,000
Fund
Land 1,00,000 Mrs. A’s Loan 38,000
Goodwill 30,000 A’s Capital A/c Stock 36,000
A’s Capital A/c Mrs.A’s Loan 38,000 B’s Capital A/c Debtors 28,000
C’s Capital A/c Creditors 20,000 C’s Capital A/c 54,000
Investments
Cash A/c Expenses 4,000 Cash A/c Debtors 60% × 21,000
35,000
Cash A/c Creditors 20,000 Cash A/c Furniture 30,000
Cash A/c Bills Payable 46,000 Cash A/c Machinery 82,000
Cash A/c Employees’ 32,000 Cash A/c Land 1,20,000
Provident Fund
Cash A/c Unrecorded 22,000
Assets
Loss on Revaluation
transferred to:
A 30,800
B 30,800
C 15,400 77,000
6,48,000 6,48,000

Partners’ Capital Account

Dr. Cr.
Particulars A B C Particulars A B C
Realisation A/c - -
36,000 Balance b/d 1,20,000 1,00,000 1,00,000
Stock
Realisation A/c - - Realisation A/c - -
28,000 38,000
Debtors Mrs.A’s Loan
Realisation A/c - - Realisation A/c - -
54,000 20,000
Investments Creditors
Realisation A/c
30,800 30,800 15,400
Loss
Cash A/c 91,200 41,200 50,600
1,58,000 1,00,000 1,20,000 1,58,000 1,00,000 1,20,000

C’s Loan A/c

Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Cash A/c 30,000 Balance b/d 30,000
30,000 30,000

Cash A/c
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Balance b/d 40,000 Realisation A/c 20,000
Creditors
Realisation A/c 21,000 Realisation A/c 4,000
Debtors Expenses
Realisation A/c 30,000 Realisation A/c Bills 46,000
Furniture Payable
 Realisation A/c 82,000 Realisation A/c 32,000
Machinery Employees’ Provident
Fund
Realisation A/c Land 1,20,000 C’s Loan A/c 30,000
Realisation A/c 22,000 A’s Capital A/c 91,200
Unrecorded Assets
B’s Capital A/c 41,200
C’s Capital A/c 50,600
3,15,000 3,15,000

Question:41
Krishna and Arjun are partners in a firm. They share profits in the ratio of 4 : 1. They decide to dissolve the firm on 31st March, 2019 at which date their Balance Sheet stood as:

Amount Amount
Liabilities Assets

Bank Loan 1,500 Trademarks 1,200

Creditors for
8,000 Machinery 12,000
Goods
Bills Payable 500 Furniture 400
Capital A/cs: Stock 6,000
Krishna 16,000 Debtors 9,000
Arjun 6,000 22,000 Less: Provision for Bad Debts 400 8,600
Cash at Bank 2,800
Advertisement Suspense 1,000

32,000 32,000

The realisation shows the following results:

a Goodwill was sold for 1,000.
b Debtors were realised at book value less 10%.
c Trademarks realised 800.
d Machinery and Stock-in-Trade were taken by Krishna for 14,400 and 3,600 respectively.
e An unrecorded asset estimated at 500 was sold for 200.
f Creditors for goods were settled at a discount of 80. The expenses on realisation were 800.
Prepare Realisation Account, Partners' Capital Accounts and Bank Account. ​

Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Trade Marks 1,200 Provision for Bad Debts 400
Machinery 12,000 Bank Loan 1,500
Furniture 400 Creditors for Goods 8,000
Stock 6,000 Bills Payable 500
Debtors 9,000
Bank A/c: Bank A/c:
Bank Loan 1,500 Goodwill 1,000
Creditors 7,920 Debtors 8,100
Bills Payable 500 Trade Marks 800
Expense 800 10,720 Unrecorded Assets 200 10,100
Krishna’s Capital A/c:
Machinery 14,400
Stock in Trade 3,600 18,000
Loss transferred to:
Krishna’s Capital A/c 656
Arjun’s Capital A/c 164 820

39,320 39,320

Partners’ Capital Accounts

Dr. Cr.
Particulars Krishna Arjun Particulars Krishna Arjun
Advertisement 800 200 Balance b/d 16,000 6,000
Suspense A/c
Realisation 18,000 –
A/c Assets
Realisation 656 164 Bank A/c 3,456 –
A/c Loss
Bank A/c – 5,636
19,456 6,000 19,456 6,000

Bank Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Balance b/d 2,800 Realisation A/c 10,720
Realisation A/c 10,100 Arjun’s Capital A/c 5,636
Krishna’s
3,456
Capital A/c

16,356 16,356
Question:42
There are two partners X and Y in a firm and their capitals are 50,000 and 40,000. The creditors are 30,000. The assets of the firm realise 1,00,000. How much will X and Y
receive?
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Sundry Assets (WN) 1,20,000 Creditors 30,000
Cash A/c 30,000 Cash A/c 1,00,000
Loss transferred to:
X’s Capital A/c 10,000
Y’s Capital A/c 10,000 20,000
1,50,000 1,50,000

Partners’ Capital Accounts

Dr. Cr.
Particulars X Y Particulars X Y
Realisation 10,000 10,000 Balance b/d 50,000 40,000
A/c Loss
Cash A/c 40,000 30,000

50,000 40,000 50,000 40,000

Cash Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Realisation
1,00,000 Realisation A/c 30,000
A/c
X’s Capital A/c 40,000
Y’s Capital A/c 30,000

1,00,000 1,00,000

Working Note:
Memorandum Balance Sheet
Amount Amount
Liabilities Assets
Rs Rs
Capital A/c Sundry Assets 1,20,000
(Balancing
X 50,000
Figure)
Y 40,000 90,000
Creditors 30,000

1,20,000 1,20,000

Question:43
A, B and C were partners sharing profits in the ratio of 5 : 3 : 2. On 31st March, 2019, A's Capital and B's Capital were 30,000 and 20,000 respectively but C owed 5,000 to the
firm. The liabilities were 20,000. The assets of the firm realised 50,000.
Prepare Realisation Account, Partner's Capital Accounts and Bank Account.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Sundry Assets (WN) 65,000 Creditors 20,000
Cash A/c (Assets
Cash A/c Creditors 20,000 50,000
realised)
Loss transferred to:
A’s Capital A/c 7,500
B’s Capital A/c 4,500
C’s Capital A/c 3,000 15,000
85,000 85,000

Partners’ Capital Accounts

Dr. Cr.
Particulars A B C Particulars A B C
Balance – – 5,000 Balance b/d 30,000 20,000 –
b/d
Realisation 7,500 4,500 3,000 Cash A/c – – 8,000
A/c Loss
Cash A/c 22,500 15,500 –

30,000 20,000 8,000 30,000 20,000 8,000

Cash Account
Dr. Cr.
 Amount Amount
Particulars Particulars
Rs Rs
Realisation Realisation A/c
50,000 20,000
A/c Assets Creditors
C’s Capital A/c 8,000 A’s Capital A/c 22,500
B’s Capital A/c 15,500

58,000 58,000

Working Note:
Memorandum Balance Sheet
as on March 31, 2018
Amount Amount
Liabilities Assets
Rs Rs
Capital A/c C’s Capital A/c 5,000
A 30,000 Sundry Assets 65,000
B 20,000 50,000 (Balancing Figure)
Other liabilities 20,000
70,000 70,000

Question:44
A and B were partners sharing profits and losses as to 7/11th to A and 4/11th to B. They dissolved the partnership on 30th May, 2018. As on that date their capitals were: A
7,000 and B 4,000. There were also due on Loan A/c to A 4,500 and to B 750. The other liabilities amounted to 5,000. The assets proved to have been undervalued in the last
Balance Sheet and actually realised 24,000.
Prepare necessary accounts showing the final settlement between partners.

Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Sundry Assets (WN) 21,250 Other liabilities 5,000
Cash A/c Liabilities 5,000 Cash A/c Assets Realised 24,000
Profit transferred to:
A’s Capital A/c 1,750
B’s Capital A/c 1,000 2,750

29,000 29,000

Partners’ Capital Accounts

Dr. Cr.
Particulars A B Particulars A B
Cash A/c 8,750 5,000 Balance b/d 7,000 4,000
Realisation A/c 1,750 1,000
Profit
8,750 5,000 8,750 5,000

Partners’ Loan Accounts

Dr. Cr.
Particulars A B Particulars A B
Cash A/c 4,500 750 Balance b/d 4,500 750

4,500 750 4,500 750

Cash Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Realisation A/c Assets 24,000 A’s Capital A/c 8,750
B’s Capital A/c 5,000
A’s Loan A/c 4,500
B’s Loan A/c 750
Realisation A/c 5,000

24,000 24,000

Working Note:
Memorandum Balance Sheet
as on May 30, 2018
Amount Amount
Liabilities Assets
Rs Rs
Capital A/cs: Sundry Assets 21,250
(Balancing
A 7,000
Figure)
B 4,000 11,000
A’s Loan 4,500
B’s Loan 750
Other Liabilities 5,000
 21,250 21,250

Question:45
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.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Sundry Assets (WN) 69,250 Sundry Creditors 20,000
Bank A/c: Bank A/c:
S. Creditors 20,000 Stock 20,000
Expenses 350 20,350 Debtors 25,000
Profit transferred to: Other Assets 20,000 65,000
A’s Capital B’s Capital A/c
1,450 7,500
A/c Machinery
B’s Capital
1,450 2,900
A/c
92,500 92,500

A’s Loan Account

Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Bank A/c 10,000 Balance b/d 10,000

10,000 10,000

Partners’ Capital Accounts

Dr. Cr.
Particulars A B Particulars A B
Realisation A/c
– 7,500 Balance b/d 25,000 15,000
Machinery
Bank A/c 26,450 8,950 Realisation A/c 1,450 1,450
Profit

26,450 16,450 26,450 16,450

Bank Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Balance b/d 750 A’s Loan A/c 10,000
Realisation A/c 65,000 A’s Capital A/c 26,450
B’s Capital A/c 8,950
Realisation A/c 20,350

65,750 65,750

Working Note:
Memorandum Balance Sheet
as on March 31, 2019
Amount Amount
Liabilities Assets
Rs Rs
Capital A/cs: Cash in Hand and 750
at Bank
A 25,000
B 15,000 40,000 Sundry Assets
Sundry Creditors other than Cash and 69,250
20,000
Bank
A’s Loan 10,000
 70,000 70,000

Question:46
Ashok and Kishore were in partnership sharing profits in the ratio of 3 : 1. They agreed to dissolve the firm. The assets (other than cash of 2,000) of the firm realised 1,10,000.
The liabilities and other particulars on that date were:
Creditors 40,000

Ashok's Capital
1,00,000
Kishore's Capital 10,000 Dr. Balance
Profit and Loss
8,000 Dr. Balance
A/c
Realisation
1,000
Expenses

You are required to close the books of the firm.

Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Sundry Assets (WN) 1,20,000 Creditors 40,000
Cash A/c: Cash A/c Assets Realised 1,10,000
Creditors 40,000 Loss transferred to:
Expenses 1,000 41,000 Ashok’s Capital A/c 8,250
Kishore’s Capital A/c 2,750 11,000

1,61,000 1,61,000

Partners’ Capital Accounts

Dr. Cr.
Particulars Ashok Kishore Particulars Ashok Kishore
Balance b/d – 10,000 Balance b/d 1,00,000 –
Realisation 8,250 2,750 Cash A/c – 14,750
A/c Loss
Profit and 6,000 2,000
Loss A/c
Cash A/c 85,750

1,00,000 14,750 1,00,000 14,750

Cash Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Balance b/d 2,000 Realisation A/c 41,000
Realisation
1,10,000 Ashok’s Capital A/c 85,750
A/c
Kishore’s
14,750
Capital A/c

1,26,750 1,26,750

Working Note:

Memorandum Balance Sheet

Amount Amount
Liabilities Assets
Rs Rs
Creditors 40,000 Cash 2,000
Ashok’s Capital 1,00,000 Kishore’s Capital 10,000
Profit and Loss 8,000
A/c
Sundry Assets 1,20,000
(Balancing figure)

1,40,000 1,40,000

Question:47
X, Y and Z entered into a partnership and contributed 9,000; 6,000 and 3,000 respectively. They agreed to share profits and losses equally. The business lost heavily during
the very first year and they decided to dissolve the firm. After realising all assets and paying off liabilities, there remained a cash balance of 6,000.
Prepare Realisation Account and Partner's Capital Accounts.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Sundry Assets (WN 2) 18,000 Cash A/c Asset realised 6,000
Loss transferred to:
X’s Capital A/c 4,000
Y’s Capital A/c 4,000
 Z’s Capital A/c 4,000 12,000

18,000 18,000

Partners’ Capital Accounts

Dr. Cr.
Particulars X Y Z Particulars X Y Z
Realisation 4,000 4,000 4,000 Balance 9,000 6,000 3,000
A/c Loss b/d
Cash A/c 5,000 2,000 – Cash A/c – – 1,000

9,000 6,000 4,000 9,000 6,000 4,000

Working Notes:

WN 1
Cash Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Realisation 6,000 X’s Capital A/c 5,000
A/c
Z’s Capital
1,000 Y’s Capital A/c 2,000
A/c

7,000 7,000

WN 2
Memorandum Balance Sheet
Amount Amount
Liabilities Assets
Rs Rs
Capital A/cs: Sundry Assets 18,000
X’s Capital A/c 9,000 (Balancing figure)
Y’s Capital A/c 6,000
Z’s Capital A/c 3,000 18,000
18,000 18,000

Question:48
A, B and C started business on 1st April, 2018 with capitals of 1,00,000; 80,000 and 60,000 respectively sharing profits losses in the ratio of 4 : 3 : 3. For the year ended 31st
March, 2019, the firm suffered a loss of 50,000. Each of the partners withdrew 10,000 during the year.
On 31st March, 2019, the firm was dissolved, the creditors of the firm stood at 24,000 on that date and Cash in Hand was 4,000. The assets realised 3,00,000 and Creditors
were paid 23,500 in full settlement of their claims.
Prepare Realisation Account and show your workings clearly.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars

Sundry Assets (WN 2) 1,80,000 Sundry Creditors 24,000

Cash A/c
Cash A/c Creditors 23,500 3,00,000
Assets
Profit transferred to:
A’s Capital
48,200
A/c
B’s Capital
36,150
A/c
C’s Capital
36,150 1,20,500
A/c

3,24,000 3,24,000

Partners’ Capital Accounts

Dr. Cr.
Particulars A B C Particulars A B C
Balance 70,000 55,000 35,000
b/d
Cash A/c 1,18,200 91,150 71,150 Realisation 48,200 36,150 36,150
A/c

1,18,200 91,150 71,150 1,18,200 91,150 71,150

Cash Account
Dr. Cr.
Amount Amount
Particulars Particulars

Balance
4,000 Realisation A/c 23,500
b/d
Realisation
3,00,000 A’s Capital A/c 1,18,200
A/c
B’s Capital A/c 91,150
 C’s Capital A/c 71,150

3,04,000 3,04,000

Working Notes:

WN 1 Calculation of Partners’ Capital as on April 01, 2019

Particulars X Y Z
Capital as on April 01, 2018 1,00,000 80,000 60,000
Less:Drawings 10,000 10,000 10,000
Less: Share of Loss 4 : 3 : 20,000 15,000 15,000
3
Capital as on April 01, 2019 70,000 55,000 35,000

WN 2
Memorandum Balance Sheet
as on March 31, 2019
Amount Amount
Liabilities Assets

Capital A/cs: Cash in Hand 4,000

A 70,000 Sundry Assets 1,80,000
B 55,000 (Balancing figure)
C 35,000
Creditors 24,000

1,84,000 1,84,000

Question:49
A, B and C were in partnership sharing profits and losses in the ratio of 2 : 1 : 1. They decided to dissolve the partnership. On that date of dissolution, Sundry Assets (including
cash 5,000) amounted to 88,000, assets realised 80,000 including an unrecorded asset which realised 4,000. A contingent liability on account of bills discounted 8,000
was paid by the firm. The Capital Accounts of A, B and C showed a balance of 20,000 each.
Prepare Realisation Account, Partners' Capital Accounts and Cash Account.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Sundry Liabilities
Sundry Assets 83,000 28,000
(WN )
Cash A/c Assets
80,000
realised
Cash A/c: Loss transferred to:
Sundry A’s Capital
28,000 5,500
Liabilities A/c
Contingent B’s Capital
8,000 36,000 2,750
Liabilities A/c
C’s Capital
2,750 11,000
A/c
1,19,000 1,19,000

Partners’ Capital Accounts

Dr. Cr.
Particulars A B C Particulars A B C
Realisation 5,500 2,750 2,750 Balance 20,000 20,000 20,000
A/c Loss b/d
Bank A/c 14,500 17,250 17,250

20,000 20,000 20,000 20,000 20,000 20,000

Cash Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Balance b/d 5,000 Realisation A/c 36,000
Realisation
80,000 A’s Capital A/c 14,500
A/c
B’s Capital A/c 17,250
C’s Capital A/c 17,250

85,000 85,000

Working Notes:
Memorandum Balance Sheet
Amount Amount
Liabilities Assets
Rs Rs
Capital A/cs: Cash in Hand 5,000
A 20,000 Sundry Assets 83,000
B 20,000
C 20,000 60,000
 Sundry Liabilities 28,000
(Balancing figure)
88,000 88,000

Question:50
On 1st April, 2018, A, B and C commenced business in partnership sharing profits and losses in proportion of 1/2, 1/3 and 1/6 respectively. They paid into their Bank A/c as their
capitals 22,000; 10,000 by A, 7,000 by B and 5,000 by C. During the year, they drew 5,000; being 1,900 by A, 1,700 by B and 1,400 by C.
On 31st March, 2019, they dissolved their partnership, A taking up Stock at an agreed valuation of 5,000, B taking up Furniture at 2,000 and C taking up Debtors at 3,000. After
paying up their Creditors, there remained a balance of 1,000 at Bank. Prepare necessary accounts showing the distribution of the cash at the Bank and of the further cash
brought in by any partner or partners as the case required.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars

Sundry Assets (WN) 17,000 A’s Capital Stock 5,000

B’s Capital Furniture 2,000
C’s Capital Debtors 3,000
Bank A/c Assets realised 1,000
Loss transferred to:
A’s Capital A/c 3,000
B’s Capital A/c 2,000
C’s Capital A/c 1,000 6,000
17,000 17,000

Partners’ Capital Accounts

Dr. Cr.
Particulars A B C Particulars A B C
Realisation 5,000 2,000 3,000 Balance 8,100 5,300 3,600
A/c b/d
Realisation 3,000 2,000 1,000 Cash A/c – – 400
A/c Loss
Cash A/c 100 1,300 –

8,100 5,300 4,000 8,100 5,300 4,000

Bank Account
Dr. Cr.
Amount Amount
Particulars Particulars

Realisation
1,000 A’s Capital A/c 100
A/c
C’s Capital
400 B’s Capital A/c 1,300
A/c

1,400 1,400

Working Notes:
Memorandum Balance Sheet
as on March 31, 2019
Amount Amount
Liabilities Assets

Capital A/cs:
10,000 – 17,000
A 8,100 Sundry Assets
1,900
7,000 –
B 5,300 (Balancing figure)
1,700
C 5000 – 1400 3,600

17,000 17,000

Question:51
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.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars

Sundry Assets (WN) 4,80,000 Trade Creditors 2,00,000

B’s Loan 20,000
Cash Assets realised 4,50,000
Cash A/c Creditors 2,00,000 B’s Capital A/c B’s Loan 20,000
Loss transferred to:
A’s Capital A/c 20,000
B’s Capital A/c 10,000 30,000

7,00,000 7,00,000
 Partners’ Capital Accounts
Dr. Cr.
Particulars A B Particulars A B
Realisation – 20,000 Balance 1,70,000 30,000
A/c b/d
Realisation 20,000 10,000
A/c Loss
Cash A/c 1,50,000

1,70,000 30,000 1,70,000 30,000

Cash Account
Dr. Cr.
Amount Amount
Particulars Particulars

Realisation
4,50,000 Realisation A/c Creditors 2,00,000
A/c Assets
A’s Capital A/c 1,50,000
A’s Loan A/c 1,00,000

4,50,000 4,50,000

Working Notes:

Memorandum Balance Sheet

as at 31st March, 2019
Amount Amount
Liabilities Assets

Capital A/cs: B’s Loan 20,000

A 1,70,000
B 30,000 2,00,000 Sundry Assets 4,80,000
A’s Loan 1,00,000 (Balancing
figure)
Trade Creditors 2,00,000

5,00,000 5,00,000

Question:52
X and Y were partners sharing profits and losses in the ratio of 3 : 2. They decided to dissolve the firm on 31st March, 2019. On that date, their Capitals were X − 40,000 and
Y − 30,000. Creditors amounted to 24,000.
Assets were realised for 88,500. Creditors of 16,000 were taken over by X at 14,000. Remaining Creditors were paid at 7,500. The cost of realisation came to 500.
Prepare necessary accounts.
Solution:
Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars

Sundry Assets 94,000 Creditors 24,000

X’s Capital A/c Creditors 14,000 Cash Assets Realised 88,500
Cash A/c: Loss transferred to:
Creditors 7,500 X’s Capital A/c 2,100
Expenses 500 8,000 Y’s Capital A/c 1,400 3,500

1,16,000 1,16,000

Partners’ Capital Accounts

Dr. Cr.
Particulars X Y Particulars X Y
Realisation A/c 2,100 1,400 Balance b/d 40,000 30,000
Loss
Cash A/c 51,900 28,600 Realisation A/c 14,000
Creditors –

54,000 30,000 54,000 30,000

Cash Account
Dr. Cr.
Amount Amount
Particulars Particulars

Realisation
88,500 Realisation A/c 8,000
A/c Assets
X’s Capital A/c 51,900
Y’s Capital A/c 28,600
88,500 88,500

Working Notes

Memorandum Balance Sheet

as on March 31, 2019
 Amount Amount
Liabilities Assets

Capital A/cs: Sundry Assets 94,000

(Balancing
X 40,000
figure)
Y 30,000 70,000

Creditors 24,000

94,000 94,000

Question:53
P, Q and R are partners sharing profits and losses in the ratio of 3 : 3 : 2 respectively. Their respective capitals are in their profit-sharing proportions. On 1st April, 2018, the total
capital of the firm and the balance of General Reserve are 80,000 and 20,000 respectively. During the year 2018-19, the firm made a profit of 28,000 before charging interest on
capital @ 5%. The drawings of the partners are P— 8,000; Q— 7,000; and R— 5,000. On 31st March, 2019, their liabilities were 18,000.
On this date, they decided to dissolve the firm. The assets realised 1,08,600 and realisation expenses amounted to 1,800.
Prepare necessary Ledger Accounts to close the books of the firm.
Solution:
Realistationn Account
Dr. Cr.
Amount Amount
Particulars Particulars

Sundry Assets (WN

1,26,000 Creditors 18,000
1)
Cash A/c Assets
1,08,600
Realised
Loss transferred
Cash A/c:
to:
P’s
Creditors 18,000 Capital 7,200
A/c
Q’s
Expenses 1,800 19,800 Capital 7,200
A/c
R’s
Capital 4,800 19,200
A/c

1,45,800 1,45,800

Partners’ Capital Accounts

Dr. Cr.
Particulars P Q R Particulars P Q R
Drawings
8,000 7,000 5,000 Balance b/d 30,000 30,000 20,000
A/c
Realisation 7,200 7,200 4,800 Interest on Capital A/c 1,500 1,500 1,000
A/c Loss
Cash A/c 32,800 33,800 22,200 P/L Appropriation A/c 9,000 9,000 6,000
(WN 3)
General Reserve 7,500 7,500 5,000
48,000 48,000 32,000 48,000 48,000 32,000

Cash Account
Dr. Cr.
Amount Amount
Particulars Particulars

Realisation
A/c 1,08,600 Realisation A/c 19,800

P’s Capital A/c 32,800

Q’s Capital A/c 33,800
R’s Capital A/c 22,200

1,08,600 1,08,600

Working Note:

WN 1
Memorandum Balance Sheet
as on 31st March, 2019

Amount Amount
Liabilities Assets

Capital A/cs: Sundry Assets 1,26,000

P WN 2 22,000 (Balancing figure)
Q WN 2 23,000
R WN 2 15,000 60,000
General Reserve 20,000
Profit and Loss A/c 28,000
Creditors 18,000
1,26,000 1,26,000
WN 2
Computatation of Partners' Capital after drawings as on 31st March, 2019
Dr. Cr.
Particulars P Q R Particulars P Q R
Drawings
8,000 7,000 5,000 Balance b/d 30,000 30,000 20,000
A/c
Adjusted 22,000 23,000 15,000
Capital
30,000 30,000 20,000 30,000 30,000 20,000

WN 3
Profit and Loss Appropriation Account
Dr. for the year ending 31st March, 2019 Cr.
Amount Amount
Particulars Particulars

Interest on Capital
Profit and Loss A/c 28,000
A/cs:
P 1,500
Q 1,500
R 1,000 4,000
Profit transferred to:
P’s
Capital 9,000
A/c
Q’s
Capital 9,000
A/c

R’s
Capital 6,000 24,000
A/c

28,000 28,000

Question:54
X, Y and Z entered into partnership on 1st April, 2016. They contributed capital 40,000, 30,000 and 20,000 respectively and agreed to share profits in the ratio of 3 : 2 : 1.
Interest on capital was to be allowed @ 15% p.a. and interest on drawings was to be charged at an average rate of 5%. During the two years ended 31st March, 2018, the firm
made profit of 21,600 and 25,140 respectively before allowing or charging interest on capital and drawings. The drawings of each partner were 6,000 per year.
On 31st March, 2018, the partners decided to dissolve the partnership due to difference of opinion. On that date, the creditors amounted to 20,000. The assets, other than cash
2,000, realised 1,21,000. Expenses of dissolution amounted to 760.
Draw up necessary Ledger Accounts to close the books of the firm.
Solution:
Profit and Loss Appropriation
for the year ended March 31, 2017
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Interest on Capital A/c: Profit and Loss A/c 21,600
X (40,000 × Interest on
6,000
15%) Drawings
Y (30,000 × X (6,000 ×
4,500 300
15%) 5%)
Z (20,000 × Y (6,000 ×
3,000 13,500 300
15%) 5%)
Z (6,000 ×
300 900
5%)
Profit transferred to:
X’s Capital
4,500
A/c
Y’s Capital
3,000
A/c
Z’s Capital
1,500 9,000
A/c
22,500 22,500

Partners’ Capital Accounts

for the year 2016-17
Dr. Cr.
Particulars X Y Z Particulars X Y Z
Drawings 6,000 6,000 6,000 Cash A/c 40,000 30,000 20,000
A/c
Interest on 300 300 300 Interest on 6,000 4,500 3,000
Drawings Capital A/c
P/L 4,500 3,000 1,500
Appropriation
A/c
Balance c/d 44,200 31,200 18,200

50,500 37,500 24,500 50,500 37,500 24,500

Profit and Loss Appropriation Account

for the year ended March 31, 2018
Dr. Cr.
 Amount Amount
Particulars Particulars
Rs Rs
Interest on Capital A/c Profit and Loss 25,140
X (44,200 ×
6,630 Interest on Drawings
15%)
Y (31,200 × X (6,000 ×
4,680 300
15%) 5%)
Z (18,200 × Y (6,000 ×
2,730 14,040 300
15%) 5%)
Z (6,000 × 300 900
Profit transferred to :
5%)
X’s Capital A/c 6,000
Y’s Capital A/c 4,000
Z’s Capital A/c 2,000 12,000
26,040 26,040

Partners’ Capital Accounts

for the year ended March 31,2018
Dr. Cr.
Particulars X Y Z Particulars X Y Z
Drawings 6,000 6,000 6,000 Balance b/d 44,200 31,200 18,200
A/c
Interest on 300 300 300 Interest on 6,630 4,680 2,730
Drawing Capital A/c
Balance 50,530 33,580 16,630 P/L 6,000 4,000 2,000
c/d Appropriation
A/c

56,830 39,880 22,930 56,830 39,880 22,930

Balance b/d 50,530 33,580 16,630

Cash A/c 51,280 34,080 16,880 Realisation 750 500 250
A/c Profit

51,280 34,080 16880 51,280 34,080 16,880

Realisation Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Sundry Assets 1,18,740 Creditors 20,000
Cash A/c: Cash Assets realised 1,21,000
Creditors 20,000
Expanses 760 20,760
Profit transferred to:
X’s Capital A/c 750
Y’s Capital A/c 500
Z’s Capital A/c 250 1,500

1,41,000 1,41,000

Partners’ Capital Accounts

Dr. Cr.
Particulars X Y Z Particulars X Y Z
Balance 50,530 33,580 16,630
b/d
Cash A/c 51,280 34,080 16,880 Realisation 750 500 250
A/c Profit

51,280 34,080 16880 51,280 34,080 16,880

Cash Account
Dr. Cr.
Amount Amount
Particulars Particulars
Rs Rs
Balance b/d 2,000 Realisation A/c 20,760
Realisation A/c 1,21,000 X’s Capital A/c 51,280
Y’s Capital A/c 34,080
Z’s Capital A/c 16,880

1,23,000 1,23,000

Memorandum Balance Sheet

as on March 31, 2018
Amount Amount
Liabilities Assets
Rs Rs
Capital A/cs: Cash 2,000
X 50,530 Sundry Assets 1,18,740
Y 33,580
Z 16,630 1,00,740
Creditors 20,000

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1,20,740 1,20,740
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