Class 12 Accountancy Vol 1 Chapter 7- Dissolution of Partnership Firm

Ts Grewal Solutions for Class 12 Accountancy Vol 1 Chapter 7:

TS Grewal Solutions for Class 12 Accountancy Chapter 7- Dissolution of Partnership Firm is an elementary concept to be learned by the students. Here, we have furnished TS Grewal Accountancy solutions for class 12 in a simple and a step by step method, which is beneficial for the students to score well in their upcoming board exams.

Board CBSE
Class Class 12
Subject Accountancy
Chapter Chapter 7
Chapter Name Dissolution of Partnership Firm
Number of questions solved 07
Category TS Grewal

Chapter 7- Dissolution of Partnership Firm explains the below-mentioned concepts:

  • Modes of Dissolution of a firm
  • Settlements of accounts
  • Accounting treatment on the dissolution of a firm
  • Workmen Compensation Reserve
  • Accounting for unrecorded assets and liabilities

TS Grewal Solutions for Class 12 Accountancy Chapter 7- Dissolution of Partnership Firm

Question 1

A, B and C’s firm was dissolved on 31st March 2018. B demands that his loan of ₹. 50,000/- should be paid before payment of ca[itals of the partners. But, A and C demand that the capital should be paid before the payment of B’s loan. In such a scenario, who is right?

Solution:
B is right in this case. According to Section 48 of the Indian Partnership Act, 1932 partners loan is paid before the payment of the partner’s account.

Question 2

X and Y are partners in an enterprise sharing profits in the ratio of 3:2. Mrs X has given a loan of ₹. 30,000/- to the firm and the firm had also taken a loan of ₹.10,000/- from X. The firm was dissolved and its assets were realised for ₹.30,000/-. State the order of payment of Mrs X’s loan and Y’s loan with reason, if there were no other creditors of the firm.

Solution:

According to Section 48 of the Indian Partnership Act, 1932, Mrs X’s loan of ₹. 30,000/- being an outside party’s debt will be paid before payment of Y’s loan. Y will be paid up to be available on cash ₹. 5,000/-

Question 3

What journal entries would be passed for the following transactions on the dissolution of an enterprise of partners A and B?

  • Old furniture which had been written off in the books was sold for ₹. 20,000/-
  • ‘P’ an old customer whose account for ₹. 10,000/- was written off as bad debt in the previous year, paid 70%
  • ‘A’ agreed to take over the enterprise’s goodwill (not recorded in the books of a firm) at ₹. 50,000/-
  • There was an old computer which had been written off from the books. It was estimated to realise ₹.5,000/-. It is taken by ‘B’ a partner at the estimated price of less than 30%.
  • Investments costing ₹.20,000/- (being 1000 shares) had been written off from the books. Thses shares or investments are valued at ₹.15/- each and divided among the partners in their profit sharing ratio.

Solution:

Journal entries

Date Particulars L.F. Debit Credit
Bank a/c Dr.

To realisation a/c

(Being the already written off furniture sold)

20,000 20,000
Bank a/c Dr.

To realisation a/c

(Being the debt already written off recovered)

7,000 7,000
A’s capital a/c Dr.

To realisation a/c

(Being the unrecorded goodwill taken over by A)

50,000 50,000
B’s capital a/c Dr.

To realisation a/c

(Being the computer already written off taken over by B)

3,500 3,500
A’s capital a/c Dr.

B’s capital a/c Dr.

To realisation a/c

(Being investments (shares) written off taken over by A and B in their profit sharing ratio)

7,500 7,500 15,000

Question 4

Virat and Ranveer were partners in firm sharing profits in the ratio of 4:1. On March 31st, 2018, their balance sheet was as follows: Balance Sheet of Virat and Ranveer as on 31st March 2018

Liabilities Assets
Creditors Workmen Compensation Fund Ranveer’s current account Capital a/c: Virat Ranveer 45,000 40,000 65,000 2,00,000 1,00,000 Bank Debtors Stock Furniture Machinery Virat’s current a/c 55,000 60,000 85,000 1,00,000 1,30,000 20,000
4,50,000 4,50,000

On the above date, the firm was dissolved:

  • Virat took over 40% of the stock @ 10% less than its book value and the remaining stock was sold for ₹. 40,000/-. Furniture realised @ ₹. 80,000/-
  • An unrecorded investment was sold for ₹.20,000/-. Machinery was sold at a loss of ₹. 60,000/-
  • Debtors realised at ₹. 55,000/-
  • There was an outstanding bill for the repairs for which ₹.19,000/- was paid

Prepare Realisation Account.

Solution:

Dr. Realisation Account Cr.
Particulars Particulars
To Debtors To Stock a/c To Furniture a/c To Machinery a/c To bank a/c (payment) – O/S bills for repairs 19,000 Creditors 45,000 60,000 85,000 1,00,000 1,30,000 64,000 By Creditors By Virat’s capital a/c [Stock = 34,000-3,400] By bank a/c (Assets realised): Stock (remaining) 40,000 Furniture 80,000 Investment 20,000 Machinery 70,000 Debtors 55,000 By loss transferred to: Virat’s capital a/c 78,720 Ranvir’s capital a/c 19,680 45,000 30,600 2,65,000 98,400
4,39,000 4,39,000

Question 5

Suhas and Saptham were partners in firm sharing profits in the ratio of 3:2. In spite of repeated reminders by the authorities, they kept dumping hazardous materials into a nearby river. The court ordered for the dissolution of their partnership firm on 31st March 2018. Suhas was deputed to realise the assets and to pay the liabilities. He was paid 1,000/- as a commission for his services. The financial position of the firm on 31st March 2018 was as follows: Balance Sheet as at 31st March 2012

Liabilities Assets
Creditors Mrs Suhas’s loan Saptham’s loan Investments Fluctuations Fund Capital A/c: Suhas 42,000 Saptham 42,000 80,000 40,000 24,000 8,000 84,000 Building Investments Debtors 34,000 (-) Provision 4,000 for doubtful debts Bills receivable Cash Profit and Loss a/c Goodwill 1,20,000 30,000 30,000 37,400 6,000 8,000 4,000
2,36,000 2,36,000

The following was agreed upon:

  • Suhas agreed to pay his wife’s loan
  • Debtors realised ₹.24,000/-
  • Saptham took all the investments at ₹.27,000/-
  • Building realised at ₹.1,52,000/-
  • Creditors were payable after 2 months. They were paid immediately at a 10% discount
  • Bills receivables were settled at a loss of ₹.1,400/-
  • Realisation expenses amounted to ₹. 2,500/-

Now, prepare Realisation a/c. Partner’s capital a/c and cash a/c to close the books of the firm.

Solution:

Dr. Realisation Account Cr.
Particulars Particulars
To Building To Investments To Debtors To Bills Receivable To Goodwill To Suhas’s capital a/c (Wife’s loan) To Cash: Creditors 72,000 Realisation Expenses 2,500 To Suhas’s capital a/c (Commission paid) To Gain (Profit) transferred to: Suhas’s capital a/c 17,700 Saptham’s capital a/c 11,800 1,20,000 30,600 34,000 37,400 4,000 40,000 74,500 1,000 29,500 By Provision for Doubtful Debts By Creditors By Mrs Suhas’s loan By Investments Fluctuations Fund By cash a/c (assets realised): Debtors 24,000 Building 1,52,000 Bills Receivable 36,000 By Saptham’s capital a/c (Investments) 4,000 80,000 40,000 8,000 2,12,000 27,000
3,71,000 3,71,000
Dr. Partner’s Capital Account Cr.
Particulars Suhas Saptham Particulars Suhas Saptham
To Profit and Loss a/c To Realisation a/c (Investment) To Cash a/c (bal.fig.) 4,800 – 95,900 3,200 27,000 23,600 By balance b/d By Realisation a/c (Commission) By Realisation a/c (Wife’s loan) By Realisation a/c (Gain profit) 42,000 1,000 40,000 17,700 42,000 – – 11,800
1,00,700 53,800 1,00,700 53,800
Dr. Cash Account Cr.
Particulars Particulars
To Balance b/d To Realisation a/c – Assets realised 6,000 2,12,000 By Realisation a/c By Saptham’s loan a/c By Suhas’s capital a/c – final payment By Saptham’s capital a/c – final payment 74,500 24,000 95,900 23,600
2,18,000 2,18,000

Question 6

Following is the Balance Sheet of X and Y as at 31 March 2018 who share profits and losses in the ratio of 3:2.

Liabilities Assets
Sundry creditors Bills payable Mr X’s loan Workmen compensation reserve Bank loan General reserve Capital account: X 30,000 Y 40,000 75,000 30,000 25,000 8,000 50,000 30,000 70,000 Cash at bank Stock Debtors 40,500 (-) provision for doubtful 1,000 Debts Bills receivable Investments Plant and Machinery Building 4,500 25,000 39,500 15,000 60,000 80,000 64,000
2,85,000 2,85,000

On the above date, the firm was dissolved and the following arrangements were made:

  • X promised to pay X’s loan and took half of the investments at 10% discount
  • Stock and remaining investments were sold at 10% discount
  • X and Y agreed that Y shall use the firm’s name for which he will pay ₹. 40,000/-. He also agreed to pay bills payable at a discount of 10%
  • Debtors realised ₹. 35,000/-, Bills receivable ₹. 13,500/-, Plant and Machinery ₹. 38,900/-, Building ₹. 1,20,000/-

There was a car in the firm, which was written off from the books. It was taken over by X for ₹. 23,400/-

Creditors were paid 90% in full and final settlement of their dues

  • Expenses of dissolution amounted to ₹. 1,700/-

Prepare a Realisation account, Capital account of the partners and Bank account in the books of the firm.

Solution:

Dr. Realisation Account Cr.
Particulars Particulars
To Sundry assets – Transfer: Stock 25,000 Debtors 40,500 Bills receivable 15,000 Investments 60,000 Plant and machinery 80,000 Building 61,000 To X’s capital a/c (Mrs. A’s loan) To Y’s capital a/c (Bills Payable) To Bank a/c (Sundry Creditors) To Bank a/c (Bank Loan) To Bank a/c (Expenses) To gain (profit) on realisation transferred to: X’s capital a/c 45,360 Y’s capital a/c 30,240 2,81,500 25,000 27,000 67,500 50,000 1,700 75,600 By Provision for doubtful debts By Sundry creditors By Bills Payable By Mr X’s loan By Bank loan By A’s capital a/c – Investments

(₹. 30,000 – ₹. 3,000)

By Bank a/c – Assets realised: Stock 22,500

(₹. 25,000 – ₹. 2,500)

Investments 27,000

(₹. 30,000 – ₹. 3,000)

Debtors 35,000

Bills receivable 13,500

Plant and Machinery 38,900 Building 1,20,000 By Y’s capital a/c – Goodwill By X’s capital a/c – car

1,000 75,000 30,000 25,000 50,000 27,000 2,56,900 40,000 23,400
5,28,300 5,28,300
Dr. Partner’s Capital Account Cr.
Particulars X Y Particulars X Y
To Realisation a/c – Assets To Realisation a/c – Car To Bank a/c – Final payment 27,000 23,400 70,960 40,000 – 71,240 By balance b/d By Realisation a/c (gain profit) By Realisation a/c – Liabilities By General Reserve a/c By Workmen compensation Reserve a/c 30,000 45,360 25,000 16,200 4,800 40,000 30,240 27,000 10,800 3,200
1,21,360 1,11,240 1,21,360 1,11,240
Dr. Bank Account Cr.
Particulars Particulars
To balance b/d To Realisation a/c – Assets realised 4,500 2,56,900 By Realisation a/c – Creditors By Realisation a/c – Bank Loan By Realisation a/c – Expenses By Realisation a/c – Final Payment By Realisation a/c – Final Payment 67,500 50,000 1,700 70,960 71,240
2,61,400 2,61,400

Question 7

All the partners decide to dissolve the firm on 31st March 2018. Y, a partner demands that his loan of ₹. 1,00,000/- must be paid before the payment of Mrs X’s loan of ₹. 50,000/-. However, X, another partner, demands that Mr X’s loan must be paid before payment of Y’s loan. Who is right?

Solution:

X is right. According to Section 48 of the Indian Partnership Act, 1932, outside party’s debts are paid before payment of the partner’s loan. Mrs X is not a partner in the firm. The above-provided solutions are considered to be the best solutions for ‘TS Grewal Solutions Class 12 Accountancy Class 12 Accountancy Vol 1 Chapter 7- Dissolution of Partnership Firm’. Stay tuned to BYJU’S to learn more and score well in the upcoming board examinations.