Dissolution of Firm

Questions which are to be solved during classes.

1. A,B and C are partner sharing profits and losses in 5:3:2.Give journal entries for following transactions at the
time of Dissolution of firm after assets and liabilities transferred to Realisation A/c:
(i) Profit and Loss Account (Dr. Balance) appeared in the books at Rs. 40,000.
(ii) Payment made to Creditors of ` 20,000.
(iii) Payment was made for an unrecorded liability amounting to Rs. 20,000 was settled at Rs. 8,000.
(iv) Motor Car of the book value of Rs. 1,00,000 was sold at ` 90,000.
(v) C took stock at Rs. 10,000 which Book Value was Rs. 15,000.
(vi) A’s Loan of ` 15,000 was settled.
(vii) B agreed to pay off creditors of ` 5,000.
(viii) Profit on realization ` 20,000.
2. A, B and C are partner sharing profits and losses in 5:3:2.Give journal entries for following transactions at the
time of Dissolution of firm after assets and liabilities transferred to Realisation A/c :
(i) Profit and Loss Account (Cr. Balance) appeared in the books at Rs. 40,000.
(ii) Bank loan of ` 10,000 was paid.
(iii) Creditor of `20,000 were settled at Rs. 15,000.
(iv) Building of the book value of Rs. 5,00,000 was sold at ` 6,00,000.
(v) B took furniture of Rs. 12,000 at ` 10,000.
(vi) C’s Loan of ` 15,000 was settled.
(vii) B agreed to pay off creditors of ` 5,000.
(viii) Loss on realization ` 20,000
3. X, Y and Z are partner sharing profits and losses in 4:3:3. Give journal entries for following transactions at the
time of Dissolution of firm after assets and liabilities transferred to :
(i) General Reserve appeared in the books at Rs. 40,000.
(ii) Bank loan of ` 10,000 was settled at ` 9,000.
(iii) There was a contingent liability in respect of a claim for damages for 50,000, such liability was
settled by X at ` 45,000.
(iv) Building of the book value of Rs. 5,00,000 was taken by Y at ` 5,60,000.
(v) Furniture of ` 20,000 was taken by one of the creditors in full settlement of ` 23,000.
(vi) Machine of ` 20,000 was taken by one of the creditors as part payment of ` 25,000.
(vii) Z agreed to pay off creditors of ` 50,000 at ` 40,000.
(viii) Loss on realization ` 20,000
4. X, Y and Z are partner sharing profits and losses in 4:3:3. Give journal entries for following transactions at the
time of Dissolution of firm after assets and liabilities transferred to :
(i) Profit & Loss A/c (Cr.) appeared in the books at Rs. 30,000.
(ii) Bank loan of ` 40,000 was settled at ` 42,000.
(iii) There was a contingent liability in respect of a claim for damages for 30,000, such liability was
settled by X at ` 25,000.
(iv) Car of the book value of Rs. 6,00,000 was taken by Y at ` 5,00,000.
(v) Furniture of ` 30,000 was taken by one of the creditors in full settlement of ` 35,000.
(vi) Machine of ` 20,000 was taken by one of the creditors as part payment of ` 30,000.
(vii) Z agreed to pay off creditors of ` 30,000 at ` 18,000.
(viii) Profit on realization ` 20,000
5. A, B and C were partners sharing profit in the ratio of 2:2:1. They decided to dissolve their firm on 31 st
December, 2019 when the Balance Sheet was as follows:-
Balance Sheet
Liabilities ` Assets `
Bills Payable 10,000 Cash at Bank 25,000
Creditors 30,000 Debtors 13,000
Employees’ provident fund 10,000 Bills Receivable 20,000
B’s Loan 20,000 Stock 12,000
Capital Furniture 20,000
A 50,000 Machinery 25,000
B 30,000 Premises 55,000
 Dissolution of Firm
Questions which are to be solved during classes.
C 20,000 1,00,000
Profit and Loss A/c 10,000
1,70,000 1,70,000
The following was found:
(i) Debtors and Bill Receivable were realized at 10% less than the book value.
(ii) Stock was realized at 20% more than the book value and Furniture was sold at Rs. 18,000.
(iii) Machine was taken by A at Rs. 19,000 and Premises was sold at 50% more than the book value.
(iv) Bills Payable were settled at Rs. 9,500 and Rs. 32,000 was paid to creditors.
Give Journal entries at the time of dissolution.

6. A, B and C were partners sharing profit in the ratio of 5:2:3. They decided to dissolve their firm on 31 st March,
2021 when the Balance Sheet was as follows:-
Balance Sheet
Liabilities ` Assets `
Bills Payable 30,000 Cash at Bank 20,000
Creditors 30,000 Debtors 18,000
Bank Loan 10,000 Bills Receivable 20,000
General Reserve 20,000 Stock 32,000
Capital Furniture 30,000
A 80,000 Machinery 40,000
B 40,000 Building 60,000
C 30,000 1,50,000 Goodwill 10,000
Profit and Loss A/c 10,000
2,40,000 2,40,000
The following was found:
(i) Amount realized from Machinery Rs. 35,000; Building Rs. 30,000 more; Goodwill Rs. 20,000.
(ii) Stock was realized at 10% more than the book value and Bad Debts written off Rs. 3,000.
(iii) Bill Receivable was taken by B at Rs. 19,000 and Building was sold at 40% more than the book
value.
(iv) Creditors were settled at 10% discount and Bonk Loan was paid with interest of Rs. 2,000.
Prepare Realisation A/c, Partners Capital Accounts and Bank A/c.
7. A, B and C were partners sharing profit in the ratio of 2:2:1. They decided to dissolve their firm on 31 st March,
2022 when the Balance Sheet was as follows:-

Balance Sheet
Liabilities Rs. Assets Rs.
Outstanding Expenses 5,000 Cash at Bank 20,000
Creditors 35,000 Debtors 15,000
Employees’ provident fund 10,000 Less: Provision 2,000 13,000
Mrs. A’s Loan 20,000 Bills Receivable 25,000
B’s Loan 15,000 Investments 20,000
General Reserve 20,000 Stock 12,000
Capital Furniture 20,000
A 50,000 Machinery 20,000
B 30,000 Premises 60,000
C 20,000 1,00,000 Goodwill 5,000
Profit and Loss A/c 10,000
2,05,000 2,05,000

The following was found:

(i) A took half of the stock at Rs.7,000 and his wife’s loan at Rs. 18,000.
 Dissolution of Firm
Questions which are to be solved during classes.
(ii) Debtors realized at full, Machinery 10% less, Furniture at 20% more, Bill Receivable at 10% less
and premises at 30% more.
(iii) C took some of the investments at Rs. 7,500 ( 25% less than book value) and remaining
investments were sold at a loss of Rs. 2,000.
(iv) A discounted bill receivable of Rs. 5,000 was dishonoured and only 40 paise in a rupee recovered
from debtor.
(v) Creditors falling due on 1st June, 2022 were settled at 6% p.a. discount.
(vi) Outstanding expenses were settled at ` 4,000

From the above prepare Realisation A/c, partners’ capital accounts and Bank A/c.
8. A, B and C were partners sharing profit in the ratio of 2:2:1. They decided to dissolve their firm on
31st March, 2022 when the Balance Sheet was as follows :-
Balance Sheet
Liabilities ` Assets `
Bills Payable 10,000 Cash at Bank 25,000
Creditors 30,000 Debtors 15,000
Employees’ provident fund 10,000 Less: Provision 2,000 13,000
Mrs. A’s Loan 20,000 Bills Receivables 20,000
B’s Loan 10,000 Investments 20,000
Workmen Compensation Reserve 20,000 Stock 12,000
Capital Furniture 20,000
A 50,000 Machinery 20,000
B 30,000 Premises 55,000
C 20,000 1,00,000 Goodwill 5,000
Profit and Loss A/c 10,000
2,00,000 2,00,000
The following was found:
(i) A took half of the Investments at `7,000 and his wife’s loan at ` 18,000.
(ii) Bad debts is to be written off ` 4,000.
(iii) C took some of the Stock at ` 8,000 (20% less than book value) and remaining Stock was
sold at a loss of ` 1,000.
(iv) Bill receivables were realised at 10% less and remaining investments at 20% more.
(v) Creditors falling due on 1st May 2020 were settled at 6% p.a. discount.
(vi) Amount realised from Machinery 10% less, Furniture at 20% more and premises at 40%
more.
(vii) Liability for workmen compensation was settled at ` 12,000.

From the above prepare Realisation A/c and Partners’ capital accounts and Bank A/c.