NCERT Solution For Class 12 Accountancy Chapter 5 - Dissolution Of Partnership Firm

NCERT Solutions are said to be an extremely helpful book while preparing for the CBSE Class 12 Accountancy examinations. This study material owns a deep knowledge and the Solutions collected by the subject matter wizards are no distinct.

NCERT Solution For Class 12 Accountancy Chapter 5 – Dissolution Of Partnership Firm furnishes us with an all-inclusive data to all the concepts. As the students would have learnt the basic fundamentals about the subject of accountancy in class 11, this curriculum for class 12 is a continual part of it; which explains the concepts in a great way.

Download PDF Of Ncert Solution For Class 12 Accountancy Chapter 5 – Dissolution Of Partnership Firm

 

ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5
ncert sol class 12 accountancy chapter 5

 

Access the solution for class 12 Accountancy Chapter 5 – Dissolution Of Partnership Firm

Short Questions for NCERT Accountancy Solutions Class 12 Part 1 Chapter 5

1. State the difference between dissolution of partnership and dissolution of partnership firm.

Basis of Comparison

Dissolution of Partnership

Dissolution of Partnership firm

 

Meaning

It refers to the stage where a partner/partners discontinue their relationship with the firm.

It refers to the situation that all the relation between a firm and its partners cease to exit

Discontinuation

Business continues as usual

Discontinuation of business due to dissolving of firm

Accounts

Revaluation account is created

Realization account is created

 

Liabilities and assets

Revaluation is done

Sold off to pay for the liabilities

Economic Relationship

Continues

It comes to an end

 

Nature

Such type of event is voluntary in nature

It can be sometimes compulsory and sometimes voluntary

 

Effect

Firm is not dissolved

Both firm and partnership are dissolved

 

 

2. State the accounting treatment for:

i. Unrecorded assets

ii. Unrecorded liabilities

(i) For Unrecorded Assets

An unrecorded asset is such an asset whose value is written off from books of accounts, but it is in usable form. It is shown as:

1. If sold by cash

Cash A/c Dr.

To Realisation A/c

(Unrecorded asset sold off for cash)

2. If taken over by any partner

Partner’s Capital A/c Dr.

To Realisation A/c

(Partner takes over unrecorded asset)

ii) For unrecorded liabilities

Liabilities that are not recorded in books of firm are called unrecorded liabilities. It can be shown in records as

1. When unrecorded liability is paid off

Realisation A/c Dr.

To Cash A/c

(Paid in cash the price of unrecorded liability)

2. When undertaken by a partner

Realisation A/c Dr.

To Partner’s Capital A/c

(Liability that is unrecorded is taken over by partner)

 3. On dissolution, how you deal with partner’s loan if it appears on the

(a) Assets side of the Balance Sheet (b) Liabilities side of the Balance Sheet

 (a) When a partner’s loan is on the asset side of balance sheet, it means that partner has borrowed some amount from business and needs to pay back the same. In this instance, the loan amount gets transferred to the partners’ capital account. It is shown as:

Partner’s Capital A/c Dr.

To Partner’s Loan A/c

(Loan account of partner transferred to partner capital account)

(b) When a partner’s loan appears on liabilities side of balance sheet, it means that partner has provided loan to the business and the business has to pay back the amount which it has got from the partner. The loan is paid in cash after full filling payment of all external liabilities.

Partner’s Loan A/c Dr.

To Cash/Bank A/c

(Loan taken from partner paid in cash)

 4. Distinguish between firm’s debts and partner’s private debts.

 

Basis of Comparison

Firm’s Debts

Partner’s Private Debts

 

Meaning

Debts that are owed by a firm to the outsiders

Debts that are owed by a partner to any other person outside the firm.

 

Liability

Liability of firm’s debt lies with all the partners jointly as well as individually.

The liability of repaying debt rest only with the partner who has taken the debt.

Debt Settlement by private assets

Whenever debts of firm exceeds the assets of firm, the partner’s private assets may be utilized in order to pay firms debt, only on the condition that the partner’s asset is more than his debts

The debts that are private will be settled by private assets of the partner. If any surplus happens it will be used in paying for firms debts

Debt settlement by firm’s assets

Debts of firms’ are settles using assets’ of firm. If any asset remains after clearing the debt, it gets distributed between the partners.

Partner can utilize their share of surplus assets obtained after clearing all debts from firm for personal use.

 

 5. State the order of settlement of accounts on dissolution.

Following rules are applicable on settlement of accounts after a firm is dissolute as per Section 48 of Partnership Act, 1932.

1. Amount which is received on sale of assets should be used in this sequence:

i. Paying off all external expenses and liabilities

ii. Loans and advances that are owed to partners should be cleared.

Iii.Capitals of all the partners must be paid off.

Any amount that still remains after paying off all these items must be distributed among partners of the dissolute firm in their original profit sharing ratio.

2. In case of loss and capital deficiency, the following must be paid in this order:

i. Adjust loss and capital deficiency against profits of firm

ii. Adjust against the total capital of the firm

iii. If any loss or deficiencies is present after all the adjustments, the next course of action will be to bear the loss as per individual profit sharing ratio. 

 

6. On what account realisation account differs from revaluation account.

 

Basis of Comparison

Realisation Account

Revaluation Account

 Meaning

It is an account that is prepared to determine the net profit or loss on sale of assets and discharging of liabilities of the firm

 

It is an account that is prepared to determine variation in value of liabilities and assets of a firm.

Comprises of

All Liabilities and assets

Only those liabilities and assets that are revaluated

Time of preparation

During dissolution of firm

During firm restructuring

Frequency of Preparation

One time, when firm is dissolved.

As and when a new partner is introduced or an existing partner leaves the firm

Effect

All accounts related to liabilities and assets are closed

There is no account closure when revaluation happens

Records

Records all the Liabilities and assets

 

Records liabilities and assets whose value changed over a period.

 

 Long Questions for NCERT Accountancy Solutions Class 12 Part 1 Chapter 5

1. Explain the process of dissolution of a partnership firm?

Dissolution of a partnership firm results in the business being discontinued. Dissolution consists of disposing off assets, clearing payment for liabilities and distributing the profit or loss among all partners.

A firm may be dissolved by the following ways:

1. Dissolution by agreement which can be with consent of all partners or a contract between all partners.

2. Dissolution which becomes compulsory when all partners become insolvent or any changes in government policies making the business illegal.

3. Dissolution that is based on certain condition such as a fixed period, purpose, death of a partner or insolvency of a partner/partners

4. Dissolution by a written notice given by a partner with the intention to dissolve the firm.

5. Dissolution by court on account of a partner becoming lunatic, indulged in illegal activities, found guilty of misconduct, incapable to perform duties or dissolution reason found justified.

 

Following rules are applicable on settlement of accounts after a firm is dissolute as per Section 48 of Partnership Act, 1932.

1. Amount which is received on sale of assets should be used in the following order

i. Paying off all external expenses and liabilities

ii. Loans and advances that are owed to partners should be cleared.

Iii.Capitals of all the partners should be paid off.

Any amount that still remains after paying off all these items should be distributed among partners of the dissolute firm in their original profit sharing ratio.

2. In case of loss and capital deficiency, the following should be paid in order:

i. Adjust loss and capital deficiency against profits of firm

ii. Adjust against the total capital of the firm

iii. If there exists any loss or deficiencies after all the adjustments, the next course of action will be to bear the loss as per individual profit sharing ratio. 

 

 2. What is a Realisation Account?

When a firm is dissolved, it results in closing of all accounts, assets are sold off and liabilities are paid off. To maintain a record of all such activities, a nominal account is prepared which is called as Realisation Account. Its main purpose is to determine profit or loss that happens due to settling off assets and liabilities. If this exercise results in profit or loss, it gets transferred to the Partners’ Capital Account with their original profit sharing ratio.

The main objectives of preparing a realisation account is:

1. To ensure all accounts are closed

2. To record all transactions that is related to sale of assets and paying off liabilities

3. Determining whether profit or loss is happening due to sale of assets and paying off liabilities.

The format of realisation account is as follows:

Format of Realisation Account

 

 

Dr.                                                                                                                                          

Cr.

 

 

Particulars

Amount

Particulars

Amount

 

 

Various Assets

(Excluding Cash/Bank, fictitious assets, Debit balance of P and L A/c, partner Capital A/c, Current A/c, Loan to Partner)

 

Cash/Bank

(Payment for realisation expenses)

 

 

Cash/Bank

(Payment to outside and unrecorded liabilities)

 

 

Partner’s Capital A/c

(If any liability taken on expenses paid by him or remuneration payable to him)

 

Partner Capital A/c

(Profit on realisation distributed in the profit sharing ratio among all the partners)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Various Liabilities

(Excluding Partner Capital account, reserves, P and L A/c, Current A/c, Loan to Partner)

 

 

Provision on assets

(like, Provision for doubtful debts; Provision for depreciation)

 

Cash/Bank

(Amount received from realisation of assets and unrecorded assets)

 

Partner ‘s Capital A/c

(If any asset taken over by any partner)

 

 

Partner Capital A/c

(Loss on realisation borne by all the partners in their profit sharing ratio)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3. Reproduce the format of Realisation Account.

     

Format of Realisation Account

 

 

Dr.                                                                                                                                          

Cr.

 

 

Particulars

Amount

Particulars

Amount

 

 

Various Assets

(Excluding Cash/Bank, fictitious assets, Debit balance of P and L A/c, partner Capital A/c, Current A/c, Loan to Partner)

 

Cash/Bank

(Payment for realisation expenses)

 

 

Cash/Bank

(Payment to outside and unrecorded liabilities)

 

 

Partner’s Capital A/c

(If any liability taken on expenses paid by him or remuneration payable to him)

 

Partner Capital A/c

(Profit on realisation distributed in the profit sharing ratio among all the partners)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Various Liabilities

(Excluding Partner Capital account, reserves, P and L A/c, Current A/c, Loan to Partner)

 

 

Provision on assets

(like, Provision for doubtful debts; Provision for depreciation)

 

Cash/Bank

(Amount received from realisation of assets and unrecorded assets)

 

Partner ‘s Capital A/c

(If any asset taken over by any partner)

 

 

Partner Capital A/c

(Loss on realisation borne by all the partners in their profit sharing ratio)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4. How deficiency of creditors is paid off?

Deficiency of creditors arises when a firm is unable to pay off the creditors after selling of all the assets and utilizing partner’s private assets. In such a situation there are two procedures that needs to be followed:

1. Transferring deficiency to Partners’ Capital Account: In this procedure creditors get paid from the cash available with the firm that includes each partner’s individual contribution. The deficiency is transferred to Partners capital account and therefore is managed by all partners as per their profit sharing ratio. In case a partner becomes insolvent, it is regarded as capital loss for the firm. If the partnership deed has no clause for such a situation, then the capital loss needs to be borne by partners who are in solvent state and as per their capital ratio in the firm, as per Garner vs. Murray case.

2. Transferring the deficiency to Deficiency Account: In this process, a separate account is prepared for creditors. Then for determining the cash obtained from sale of firms and partners private assets, a cash account is prepared. Then after determining the cash available with the firm, creditors and external liabilities are paid, but not in full. The remaining creditors or the deficiency is then transferred to the deficiency account.

Numerical Question for NCERT Accountancy Solutions Class 12 Part 1 Chapter 5

1. Journalise the following transactions regarding Realisation expenses:

[a] Realisation expenses amounted to ₹ 2,500.

[b] Realisation expenses amounting to ₹ 3,000 were paid by Ashok, one of the partners.

[c] Realisation expenses ₹ 2,300 borne by Tarun, personally.

[d] Amit, a partner was appointed to realise the assets, at a cost of ₹ 4,000. The actual amount of Realisation amounted to ₹ 3,000.

 

 

Journal

 

 

 

Particulars

L.F.

Amount

Amount

(a)

Realisation A/c

Dr.

 

2,500

 

 

To Bank A/c

 

 

 

2,500

 

(Realisation expenses paid)

 

 

 

 

 

 

 

 

 

 

(b)

Realisation A/c

Dr.

 

3,000

 

 

To Ashok’s Capital A/c

 

 

 

3,000

 

(Realisation expenses paid by Ashok)

 

 

 

 

 

 

 

 

 

(c)

No entry, as all Realisation expenses are borne personally by Tarun

 

 

 

 

 

 

 

 

 

(d)

Realisation A/c

Dr.

 

4,000

 

 

To Amit’s Capital A/c

 

 

 

4,000

 

(Realisation expenses paid to Amit)

 

 

 

 

 

 

 

 

 

 

 

 

2. 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 Buildings valued ₹ 1, 20,000 and paid cash to the firm ₹ 30,000.

 

Journal

 

 

 

Particulars

L.F.

Amount

Amount

(a)

Realisation A/c

Dr.

 

40,000

 

 

To Cash A/c

 

 

 

40,000

 

(Creditors worth ₹ 85,000 accepted 40,000 as cash and investment

worth ₹ 43,000 in their full settlement)

 

 

 

 

 

 

 

 

 

 

(b)

No Entry

 

 

 

 

 

(Creditors ₹ 16,000 accepted Machinery ₹ 18,000 in the full

settlement. No entry is required since both asset and liability are

already transferred to the Realisation Account)

 

 

 

 

 

 

 

 

 

 

(c)

Cash A/c

Dr.

 

30,000

 

 

To Realisation A/c

 

 

 

30,000

 

(Creditors worth ₹ 90,000 accepted buildings worth ₹ 1,20,000 and

returned ₹ 30,000 as cash after settlement of claim to the firm)

 

 

 

 

 

 

 

 

 

 

3. There was an old computer which was written-off in the books of Accounts in the previous year. The same has been taken over by a partner Nitin for ₹ 3,000. Journalise the transaction, supposing. That the firm has been dissolved.

 

Journal

 

Particulars

L.F.

Amount

Amount

Nitin’s Capital A/c

Dr.

 

3,000

 

To Realisation A/c

 

 

 

3,000

(Unrecorded computer taken over by Nitin)

 

 

 

 

 

4. What journal entries will be recorded for the following transactions on the dissolution of a firm:

[a] Payment of unrecorded liabilities of ₹ 3,200.

[b] Stock worth ₹ 7,500 is taken by a partner Rohit.

[c] Profit on Realisation amounting to ₹ 18,000 is to be distributed between the partners Ashish and Tarun in the ratio of 5:7.

[d] An unrecorded asset realised ₹ 5,500.

 

Journal

 

Particulars

L.F.

Amount

Amount

(a)

Realisation A/c

Dr.

 

3,200

 

 

To Bank A/c

 

 

 

3,200

 

(Unrecorded liabilities paid)

 

 

 

 

 

 

 

 

 

 

(b)

(Rohit’s Capital A/c

Dr.

 

7,500

 

 

To Realisation A/c

 

 

 

7,500

 

(Stock is taken over by Rohit)

 

 

 

 

 

 

 

 

 

 

(c)

Realisation A/c

Dr.

 

18,000

 

 

To Ashish’s Capital A/c

 

 

 

7,500

 

To Tarun’s Capital A/c

 

 

 

10,500

 

(Profit on Realisation is transferred to Partners’ Capital Account)

 

 

 

 

 

 

 

 

 

 

(d)

Bank A/c

Dr.

 

5,500

 

 

To Realisation A/c

 

 

 

5,500

 

(Unrecorded asset sold)

 

 

 

 

 

 

 

 

 

 

 

 

5. Give journal entries for the following transactions:

1. To record the Realisation of various liabilities and assets,

2. A Firm has a Stock of ₹ 1, 60,000. Aziz, a partner took over 50% of the Stock at a discount of 20%,

3. Remaining Stock was sold at a profit of 30% on cost,

4. Land and Building (book value ₹ 1,60,000) sold for ₹ 3,00,000 through a broker who charged 2%, commission on the deal,

5. Plant and Machinery (book value ₹ 60,000) was handed over to a Creditor at an agreed valuation of 10% less than the book value,

6. Investment whose face value was ₹ 4,000 was realised at 50%.

 

Journal

 

Particulars

L.F.

Amount

Amount

1)

 

 

 

 

 

(a)

For Transfer of Assets

 

 

 

 

 

Realisation A/c

Dr.

 

 

 

To Assets A/c (Individually)

 

 

 

 

(Assets transferred to Realisation Account)

 

 

 

 

 

 

 

 

 

 

(b)

For Transfer of Liabilities

 

 

 

 

 

Liabilities A/c (Individually)

Dr.

 

 

 

To Realisation A/c

 

 

 

 

(Liabilities transferred to Realisation Account)

 

 

 

 

 

 

 

 

 

 

(c)

For sale of Asset

 

 

 

 

 

Cash/Bank A/c

Dr.

 

 

 

To Realisation A/c

 

 

 

 

(Assets sold)

 

 

 

 

 

 

 

 

 

 

(d)

For liabilitiy paid

 

 

 

 

 

Realisation A/c

Dr.

 

 

 

To Cash/Bank A/c

 

 

 

 

(Liabilities paid)

 

 

 

 

 

 

 

 

 

 

2)

Aziz’s Capital A/c

Dr.

 

64,000

 

 

To Realisation A/c

 

 

 

64,000

 

(Aziz, a partner took over 50% of stock at 20% discount, the value

of the total stock  was ₹ 1,60,000)

[1,60,000 × (50/100) × (80/100) = ₹ 64,000]

 

 

 

 

 

 

 

 

 

3)

Bank A/c

Dr.

 

1,04,000

 

 

To Realisation A/c

 

 

 

1,04,000

 

(Stock worth ₹ 80,000  sold at a profit of 30% on cost)

[80,000 × (130/100 = ₹ 1,04,000)]

 

 

 

 

 

 

 

 

 

4)

Bank A/c

Dr.

 

2,94,000

 

 

To Realisation A/c

 

 

 

2,94,000

 

(Land and Building sold for ₹ 3,00,000 and 2% commission

paid to the broker)

 

 

 

 

 

 

 

 

 

5)

No entry

 

 

 

 

 

(Plant and Machinery ₹ 60,000 handed over to the creditors at a

discount of 10%.  No entry is required as both the asset and liability

are already transferred to the Realisation Account)

 

 

 

 

 

 

 

 

 

6)

Bank A/c

Dr.

 

2,000

 

 

To Realisation A/c

 

 

 

2,000

 

(Investments worth ₹ 4,000 were realised at 50%)

 

 

 

 

 

 

 

 

 

 

 


6. How will you deal with the Realisation expenses of the firm of Rashim and Bindiya in the following cases?

1. Realisation expenses amounts to ₹ 1, 00,000,

2. Realisation expenses amounting to ₹ 30,000 are paid by Rashim, a partner.

3. Realisation expenses are to be borne by Rashim for which he will be paid ₹ 70,000 as remuneration for completing the dissolution process. The actual expenses incurred by Rashim were ₹ 1, 20,000.

 

 

Books of Rashim and Bindiya

 

Journal

 

 

 

Particulars

L.F.

Amount

Amount

1)

Realisation A/c

Dr.

 

1,00,000

 

 

To Bank A/c

 

 

 

1,00,000

 

(Realisation expenses paid)

 

 

 

 

 

 

 

 

 

 

2)

Realisation A/c

Dr.

 

30,000

 

 

To Rashim’s Capital A/c

 

 

 

30,000

 

(Realisation expenses borne by Rashim)

 

 

 

 

 

 

 

 

 

 

3)

Realisation A/c

Dr.

 

70,000

 

 

To Rashim’s Capital A/c

 

 

 

70,000

 

(Realisation expenses borne by Rashim and remuneration to him

for dissolution ₹ 70,000)

 

 

 

 

 

 

 

 

 

 

7. The book value of assets (other than cash and bank) 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.

 

 

Journal

 

 

Particulars

L.F.

Amount

Amount

Realisation A/c

Dr.

 

1,00,000

 

To Sundry Assets A/c

 

 

 

1,00,000

(Assets other than cash and bank transferred to Realisation Account)

 

 

 

 

 

 

 

 

 

Atul’s Capital A/c

Dr.

 

40,000

 

To Realisation A/c

 

 

 

40,000

(Atul took over 50% of assets worth ₹ 1,00,000 at 20% discount)

[1,00,000 × (50/100) × (80/100)]

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

26,000

 

To Realisation A/c

 

 

 

26,000

(Assets worth ₹ 20,000, i.e. 40% of assets of ₹ 50,000 are sold

at a profit of 30%) [50,000 × (40/100) × (130/100)]

 

 

 

 

 

 

 

 

No entry is made for obsolescence of the assets and the assets given

to the creditors in the full settlement as these are already transferred to

the Realisation Account and adjusted)

 

 

 

 

 

 

 

 

 

 

8. Record necessary journal entries to record the following unrecorded liabilities and assets in the books of Paras and Priya:

1. There was an old furniture in the firm which had been written-off completely in the books. This was sold for ₹ 3,000,

2. Ashish, an old customer whose Account for ₹ 1,000 was written-off as bad in the previous year, paid 60%, of the amount,

3. Paras agreed to take over the firm’s goodwill (not recorded in the books of the firm), at a valuation of ₹ 30,000,

4. There was an old typewriter which had been written-off completely from the books. It was estimated to realize ₹ 400. It was taken away by Priya at an estimated price less 25%,

5. 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.

 

 Books of Paras and Priya

 

Journal

 

 

 

Particulars

L.F.

Amount

Amount

1)

Bank A/c

Dr.

 

3,000

 

 

To Realisation A/c

 

 

 

3,000

 

(Unrecorded furniture sold)

 

 

 

 

 

 

 

 

 

 

2)

Bank A/c

Dr.

 

600

 

 

To Realisation A/c

 

 

 

600

 

(Bad Debt recovered which was previously written off as bad)

 

 

 

 

 

 

 

 

 

 

3)

Paras’s Capital A/c

Dr.

 

30,000

 

 

To Realisation A/c

 

 

 

30,000

 

(Unrecorded goodwill taken over by Paras)

 

 

 

 

 

 

 

 

 

4)

Priya’s Capital A/c

Dr.

 

300

 

 

To Realisation A/c

 

 

 

300

 

(Unrecorded Typewriter estimated ₹ 400 taken over by Priya at

25% less price)

 

 

 

 

 

 

 

 

 

5)

Paras’s Capital A/c

Dr.

 

300

 

 

Priya’s Capital A/c

Dr.

 

300

 

 

To Realisation A/c

 

 

 

600

 

(100 shares of ₹ 10 each  which were not recorded in the books 

taken @ ₹ 6 each by Paras and Priya and divided between them in

their profit sharing ratio)

 

 

 

 

 

 

 

 

 

 

9. All partners wish to dissolve the firm. Yastin, a partner wants that her loan of ₹ 2, 00,000 must be paid off before the payment of capitals to the partners. But, Amart, another partner wants that the capitals must be paid before the payment of Yastin’s loan. You are required to settle the conflict giving reasons.

As per section 48 of Partnership Act 1932, at the time of dissolution, loans and advances from the partners must be paid off before the settlement of their capital accounts. Hence, Yastin’s argument is correct that her loan of ₹ 2, 00,000 must be paid off before the payment of partners’ capital.

10. What journal entries would be recorded for the following transactions on the dissolution of a firm after various assets (other than cash) on the third party liabilities have been transferred to Realisation Account?

1. Arti took over the Stock worth ₹ 80,000 at ₹ 68,000.

2. There was unrecorded Bike of ₹ 40,000 which was taken over By Mr. Karim.

3. The firm paid ₹ 40,000 as compensation to employees.

4. Sundry creditors amounting to ₹ 36,000 were settled at a discount of 15%.

5. Loss on Realisation ₹ 42,000 was to be distributed between Arti and Karim in the ratio of 3:4.

 

 

Journal 

 

 

Particulars

L.F.

Amount

Amount

1

Arti’s Capital A/c

Dr.

 

68,000

 

 

To Realisation A/c

 

 

68,000

 

(Arti took over stock worth ₹ 80,000 at ₹ 68,000)

 

 

 

 

 

 

 

 

 

 

2.

Karim’s Capital A/c

Dr.

 

40,000

 

 

To Realisation A/c

 

 

40,000

 

(Karim took over an unrecorded bike of  ₹ 40,000)

 

 

 

 

 

 

 

 

 

 

3.

Realisation A/c

Dr.

 

40,000

 

 

To Bank A/c

 

 

40,000

 

(Compensation paid to the employees )

 

 

 

 

 

 

 

 

 

4.

Realisation A/c

Dr.

 

30,600

 

 

To Bank A/c

 

 

 

30,600

 

(Creditors amounting ₹ 36,000 were settled at a discount of 15%)

[36,000 × (85/100)]

 

 

 

 

 

 

 

 

 

5.

Arti’s Capital A/c

Dr.

 

18,000

 

 

Karim’s Capital A/c

Dr.

 

24,000

 

 

To Realisation A/c

 

 

 

42,000

 

(Loss on Realisation transferred to Partners’ Capital Account)

 

 

 

 

 

 

 

 

 

 

11. Rose and Lily shared profits in the ratio of 2:3. Their Balance Sheet on March 31, 2017 was as follows:

 

Balance Sheet of Rose and Lily as on March 31, 2017

 

 

Liabilities

Amount

Assets

Amount

 ₹

Creditors

40,000

Cash

 

16,000

Lily’s loan

32,000

Debtors

80,000

 

Profit and Loss

50,000

Less: Provision for doubtful Debts

3,600

76,400

Capitals:

 

 

 

 

Lily

1,60,000

Inventory

 

1,09,600

Rose

2,40,000

Bills Receivable

 

40,000

 

 

Buildings

 

2,80,000

 

5,22,000

 

 

5,22,000

 

 

 

 

 

 

 

 

 

 

 

 

Rose and Lily decided to dissolve the firm on the above date. Assets (except bills receivables) realised ₹ 4, 84,000.  Creditors agreed to take ₹ 38,000. Cost of Realisation was ₹ 2,400. There was a Motor Cycle in the firm which was bought out of the firm’s money, was not shown in the books of the firm. It was now sold for ₹ 10,000. There was a contingent liability in respect of outstanding electric bill of ₹ 5,000, Bill Receivable taken over by Rose at ₹ 33,000.

Show Realisation Account, Partners Capital Account, Loan Account and Cash Account.


 

 

 

 

Books of Rose and Lily

 

Realisation Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

 

Debtors

80,000

Provision for Doubtful Debts

3,600

 

Inventory

1,09,600

Creditors

40,000

 

Bills Receivables

40,000

Cash:

 

 

 

Buildings

2,80,000

Motor cycle

10,000

 

 

Cash:

 

Other Assets

4,84,000

4,94,000

 

Outstanding Electricity Bill

5,000

 

Rose’s Capital (Bills Receivable)

33,000

 

Creditors

38,000

 

 

 

 

Expenses

2,400

45,400

 

 

 

 

 

 

 

 

Profit transferred to:

 

 

 

 

Rose’ Capital

6,240

 

 

 

 

Lily’s Capital

9,360

15,600

 

 

 

 

5,70,600

 

5,70,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital Accounts

 

Dr.

 

Cr.

 

Particulars

Rose

Lily

Particulars

Rose

Lily

Realisation  (Bills Receivable)

33,000

 

Balance b/d

2,40,000

1,60,000

Cash A/c

2,33,240

1,99,360

Profit and Loss

20,000

30,000

 

 

 

Realisation  (Profit)

6,240

9,360

 

2,66,240

1,99,360

 

2,66,240

1,99,360

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lily’s Loan Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

Cash

32,000

Balance b/d

32,000

 

 

 

 

 

32,000

 

32,000

 

 

 

 

 

 

 

 

 

 

 

 

Cash Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

Balance b/d

16,000

Realisation:

 

Realisation:

 

Creditors

38,000

 

Motor Cycle

10,000

 

Outstanding Electricity Bill

5,000

 

Other Assets

4,84,000

4,94,000

Expenses

2,400

45,400

 

 

Lily’s Loan

32,000

 

 

Rose’s Capital A/c

2,33,240

 

 

Lily’s Capital A/c

1,99,360

 

5,10,000

 

5,10,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note: Here the Contingent Liability of Electricity Bill has been treated as Electricity Bill Payable.

 

 

12. Shilpa, Meena and Nanda decided to dissolve their partnership on March 31, 2017. Their profit sharing ratio was 3:2:1 and their Balance Sheet was as under:

 

Balance Sheet of Shilpa, Meena and Nanda as on March 31, 2017

 

 

Liabilities

Amount

Assets

Amount

Capitals:

 

Land

81,000

Shilpa

80,000

Stock

56,760

Meena

40,000

Debtors

18,600

Bank loan

20,000

Nanda’s Capital Account

23,000

Creditors

37,000

Cash

10,840

Provision for doubtful debts

1,200

 

 

General Reserve

12,000

 

 

 

1,90,200

 

1,90,200

 

 

 

 

 

 

 

 

 

 

The stock of value of ₹ 41,660 are taken over by Shiplap 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 ₹ 6,000 which were taken over by one of the Creditors at this value. Prepare Realisation Account.

 

In the books of Shilpa, Meena and Nanda

 

 

Realisation Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

Land

81,000

Bank Loan

20,000

Stock

56,760

Creditors

37000

Debtors

18,600

Provision for doubtful debts

1,200

Shilpa’s Capital A/c

20,000

Shilpa’s Capital A/c (Stock)

35,000

Cash :

 

Cash:

 

Creditors

31000

 

Stock

14000

 

Realisation Expenses

1,200

32200

Debtors

12300

Profit transferred to

 

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

 

(Bank Loan)

 

 

 

 

 

 

 

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.

 

Particulars

Amount

Particulars

Amount

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

 

 

 

 

 

 

 

 

 

 

 

 

 

13. Surjit and Rahi were sharing profits (losses) in the ratio of 3:2, their Balance Sheet as on March 31, 2017 is as follows:

 

Balance Sheet of Surjit and Rahi as on March 31, 2017

 

 

Liabilities

Amount

Assets

Amount

Creditors

38,000

Bank

11,500

Mrs. Surjit loan

10,000

Stock

6,000

Reserve

15,000

Debtors

19,000

Rahi’s loan

5,000

Furniture

4,000

Capital’s:

 

Plant

28,000

Surjit

10,000

Investment

10,000

Rahi

8,000

Profit and Loss

7,500

 

86,000

 

86,000

 

 

 

 

 

 

 

 

 

 

The firm was dissolved on March 31, 2017 on the following terms:

1. Surjit agreed to take the investments at ₹ 8,000 and to pay Mrs. Surjit’s loan.

2. Other assets were realised as follows:

Stock

5,000

Debtors

18,500

Furniture

4,500

Plant

25,000

3. Expenses on Realisation amounted to ₹ 1,600.

4. Creditors agreed to accept ₹ 37,000 as a final settlement.

You are required to prepare Realisation Account, Partners’ Capital Account and Bank Account.

 

 

 

8

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

Stock

6,000

Creditors

38,000

Debtors

19,000

Mrs. Surjit’s Loan

10,000

Furniture

4,000

Surjit’s Capital A/c (Investment)

8,000

Plant

28,000

Bank:

 

Investment

10,000

Stock

5,000

 

Surjit’s Capital A/c

10,000

Debtors

18,500

 

(Mrs. Surjit’s Loan)

 

Furniture

4,500

 

Bank:

 

Plant

25,000

53,000

Expenses

1,600

 

Loss transferred to:

 

Creditors

37,000

38,600

Surjit’s Capital A/c

3,960

 

 

 

Rahi’s Capital A/c

2,640

6,600

 

 

 

 

 

 

1,15,600

 

1,15,600

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital Account

 

Dr.

 

Cr.

 

Particulars

Surjit

Rahi

Particulars

Surjit

Rahi

Realisation (Investment)

8,000

 

Balance b/d

10,000

8,000

Realisation (Loss)

3,960

2,640

Realisation (Mrs. Surjit Loan)

10,000

 

Profit and Loss

4,500

3,000

 

 

 

 

Bank

12,540

8,360

Reserve

9,000

6,000

 

 

 

 

 

 

 

29,000

14,000

 

29,000

14,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rahi’s Loan Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

 

 

Balance b/d

5,000

Bank

5,000

 

 

 

 

 

 

 

5,000

 

5,000

 

 

 

 

 

 

 

 

 

 

 

 

Bank Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

Balance b/d

11,500

Realisation (Creditors and Expenses)

38,600

Realisation A/c (Assets realised)

53,000

Rahi’s Loan

5,000

 

 

Surjit’s Capital A/c

12,540

 

 

Rahi’s Capital A/c

8,360

 

64,500

 

 

64,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14. Rita, Geeta and Ashish were partners in a firm sharing profits/losses in the ratio of 3:2:1. On March 31, 2017 their balance sheet was as follows:

 

Liabilities

Amount

Assets

Amount

Capitals:

 

 

Cash

22,500

Rita

80,000

 

Debtors

52,300

Geeta

50,000

 

Stock

36,000

Ashish

30,000

1,60,000

Investments

69,000

Creditors

 

65,000

Plant

91,200

Bills payable

 

26,000

 

 

General reserve

 

20,000

 

 

 

 

2,71,000

 

2,71,000

 

 

 

 

 

 

On the date of above mentioned date the firm was dissolved:

1. Rita was appointed to realise the assets. Rita was to receive 5% commission on the rate of assets (except cash) and was to bear all expenses of Realisation,

2. Assets were realised as follows:

 

Debtors

30,000

Stock

26,000

Plant

42,750

3. Investments were realised at 85% of the book value,

4. Expenses of Realisation amounted to ₹ 4,100,

5. Firm had to pay ₹ 7,200 for outstanding salary not provided for earlier,

6. Contingent liability in respect of bills discounted with the bank was also materialized and paid off ₹ 9,800,

Prepare Realisation Account, Capital Accounts of Partners’ and Cash Account.

 

 

 

In the books of Rita, Geeta and Ashish

 

Realisation Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

Debtors

52,300

Creditors

65,000

Stock

36,000

Bills Payable

26,000

Investment

69,000

Cash:

 

Plant

91,200

Debtors

30,000

 

Cash:

 

Stock

26,000

 

Outstanding Salaries

7,200

 

Plant

42,750

 

Discounted Bill

9,800

 

Investment

58,650

1,57,400

Creditors

65,000

 

 

 

Bills Payable

26,000

1,08,000

Loss transferred to

 

Rita’s Capital A/c

 

7,870

Rita’s Capital A/c

57,985

 

(Commission- 1,57,400 ´ 5/100)

 

Geeta’s Capital A/c

38,657

 

 

 

 

Ashish’s Capital A/c

19,328

1,15,970

 

 

 

 

 

 

 

 

364370

 

 

364370

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital Account

 

Dr.

 

Cr.

 

Particulars

Rita

Geeta

Ashish

Particulars

Rita

Geeta

Ashish

Realisation (Loss)

57,985

38,657

19,328

Balance b/d

80,000

50,000

30,000

Bank

39,885

18,010

14,005

General Reserve

10,000

6,667

3,333

 

 

 

 

Realisation

7,870

 

 

 

 

 

 

 

 

 

 

 

97,870

56667

33333

 

97870

56,667

33,333

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

 

Balance b/d

22,500

Realisation A/c

1,08,000

 

Realisation

1,57,400

Rita’s Capital

39,885

 

 

 

Geeta’s Capital A/c

18,010

 

 

 

Ashish’s Capital A/c

14,005

 

 

 

 

 

 

 

1,79,900

 

1,79,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15. Anup and Sumit are equal partners in a firm. They decided to dissolve the partnership on December 31, 2017. When the balance sheet is as under:

 

Balance Sheet of Anup and Sumit as on December 31, 2017

 

 

Liabilities

Amount

Assets

Amount

Sundry Creditors

27,000

Cash at bank

11,000

Reserve fund

10,000

Sundry Debtors

12,000

Loan

40,000

Plants

47,000

Capital

 

 

Stock

42,000

Anup

60,000

 

Lease hold land

60,000

Sumit

60,000

1,20,000

Furniture

25,000

 

 

1,97,000

 

1,97,000

 

 

 

 

 

 

 

 

 

 

 

 

The Assets were realised as follows:

 

 

Lease hold land

72,000

Furniture

22,500

Stock

40,500

Plant

48,000

Sundry Debtors

10,500

 

The Creditors were paid ₹ 25,500 in full settlement. Expenses of Realisation amount to ₹ 2,500.

Prepare Realisation Account, Bank Account, and Partners Capital Accounts to close the books of the firm.

 

  

 

Books of Anup and Sumit

 

Realisation Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

Sundry Debtors

12,000

Sundry Creditors

27,000

Plants

47,000

Loan

40,000

Stock

42,000

Bank:

 

Lease hold land

60,000

Lease hold Land

72,000

 

Furniture

25,000

Furniture

22,500

 

Bank:

 

Stock

40,500

 

Creditors

25,500

 

Plant

48,000

 

Loan

40,000

 

Sundry Debtors

10,500

1,93,500

Expenses

2500

68,000

 

 

 

Profit transferred to

 

 

 

 

Anup’s Capital A/c

3,250

 

 

 

Sumit’s Capital A/c

3250

6,500

 

 

 

 

 

 

 

2,60,500

 

2,60,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital Account

 

Dr.

 

Cr.

 

Particulars

Anup

Sumit

Particulars

Anup

Sumit

Bank

68,250

68,250

Balance b/d

60,000

60,000

 

 

 

Reserve Fund

5,000

5,000

 

 

 

Realisation

3,250

3,250

 

 

 

 

 

 

 

68,250

68,250

 

68,250

68,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

Balance b/d

11,000

Realisation (Expenses and Liabilities)

68,000

Realisation (Assets )

1,93,500

Anup’s Capital A/c

68,250

 

 

Sumit’s Capital A/c

68,250

 

 

 

 

 

2,04,500

 

2,04,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 16. Ashu and Harish are partners sharing profit and losses as 3:2. They decided to dissolve the firm on December 31, 2017. Their balance sheet on the above date was:

 

Balance Sheet of Ashu and Harish as on December 31, 2017

 

 

Liabilities

Amount

Assets

Amount

Capitals:

 

 

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 take 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 Account.

 

 

 

 Books of Ashu and Harish

 

Realisation Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

Building

80,000

Creditors

88,000

Machinery

70,000

Bank overdraft

50,000

Furniture

14,000

Ashu’s Capital A/c (Assets taken)

1,43,000

Stock

20,000

Harish’s Capital A/c (Assets taken)

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 (Bank Overdraft)

50,000

 

 

Cash (Expenses)

3,000

 

 

Profit transferred to

 

 

 

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 (Assets taken)

1,43,000

1,12,000

Balance b/d

1,08,000

54,000

Cash

56,600

 

Realisation (Liabilities)

88,000

50,000

 

 

 

Realisation (Profit)

3,600

2,400

 

 

 

Cash

 

5,600

 

1,99,600

1,12,000

 

1,99,600

1,12,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

Balance b/d

8,000

Realisation (Expenses)

3,000

Realisation (Debtors)

46,000

Ashu’s Capital A/c

56,600

Harish’s Capital A/c

5,600

 

 

 

59,600

 

59,600

 

 

 

 

 

 

 

 

 

 

 

 

 

Working Notes:

 

Ashu

Harish

Building

95,000

 

Machinery and Furniture

 

80,000

Stock (3:2)

12,000

8,000

Investment (3:2)

36,000

24,000

 

₹ 1,43,000

₹ 1,12,000

 

 

 

17. Sanjay, Tarun and Vineet shared profit in the ratio of 3:2:1. On December 31, 2017 their balance sheet was as follows:

 

Balance Sheet of Sanjay, Tarun and Vineet as on December 31, 2017

 

 

Liabilities

Amount

Assets

Amount

Capitals:

 

 

Plant

90,000

Sanjay

1,00,000

 

Debtors

60,000

Tarun

1,00,000

 

Furniture

32,000

Vineet

70,000

2,70,000

Stock

60,000

Creditors

 

80,000

Investments

70,000

Bills payable

 

30,000

Bills receivable

36,000

 

 

 

Cash in hand

32,000

 

 

3,80,000

 

3,80,000

 

 

 

 

 

 

 

 

 

 

 

 

On this date the firm was dissolved. Sanjay was appointed to realise the assets. Sanjay was to receive 6% commission on the sale of assets (except cash) and was to bear all expenses of Realisation.

Sanjay realised the assets as follows: Plant ₹ 72,000, Debtors ₹ 54,000, Furniture ₹ 18,000, Stock 90% of the book value, Investments ₹ 76,000 and Bills receivable ₹ 31,000. Expenses of Realisation amounted to ₹ 4,500.

Prepare Realisation Account, Capital Accounts and Cash Account

 

 

Books of Sanjay, Tarun and Vineet

 

Realisation Account

Dr.

 

Cr.

Particulars

Amount

Particulars

Amount

Plant

90,000

Creditors

80,000

Debtors

60,000

Bills Payable

30,000

Furniture

32,000

Cash:

 

Stock

60,000

Plant

72,000

 

Investment

70,000

Debtors

54,000

 

Bills Receivable

36,000

Furniture

18,000

 

Cash :

 

Stock

54,000

 

Creditors

80,000

 

Investments

76,000

 

Bills Payable

30,000

1,10,000

Bills Receivable

31,000

3,05,000

Sanjay’s Capital A/c

18,300

Loss transferred to

 

(6% commission)

 

Sanjay’s Capital

30,650

 

 

 

Tarun’s Capital A/c

20,433

 

 

 

Vineet’s Capital A/c

10,217

61,300

 

4,76,300

 

4,76,300

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital Account

Dr.

 

Cr.

Particulars

Sanjay

Tarun

Vineet

Particulars

Sanjay

Tarun

Vineet

Realisation (Loss)

30,650

20,433

10,217

Balance b/d

1,00,000

1,00,000

70,000

Cash

87,650

79,567

59,783

Realisation (commission)

18,300

 

 

 

 

 

 

 

 

 

 

 

1,18,300

1,00,000

70,000

 

1,18,300

1,00,000

70,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

Balance b/d

32,000

Realisation

1,10,000

Realisation

3,05,000

Sanjay’s Capital A/c

87,650

 

 

Tarun’s Capital A/c

79,567

 

 

Vineet’s Capital A/c

59,783

 

 

 

 

 

3,37,000

 

3,37,000

 

 

 

 

 

 

 

 

 

 

 

 

 

18. The following is the Balance Sheet of Gupta and Sharma as on December 31, 2017:

 

Balance Sheet of Gupta and Sharma as on December 31, 2017

 

 

Liabilities

Amount

Assets

Amount

Sundry Creditors

38,000

Cash at Bank

12,500

Mrs.Gupta’s loan

20,000

Sundry Debtors

55,000

Mrs.Sharma’s loan

30,000

Stock

44,000

Reserve fund

6,000

Bills Receivable

19,000

Provision of doubtful debts

4,000

Machinery

52,000

Capital

 

Investment

38,500

Gupta

90,000

 

Fixtures

27,000

Sharma

60,000

1,50,000

 

 

 

2,48,000

 

2,48,000

 

 

 

 

 

 

 

 

 

 

 

The firm was dissolved on December 31, 2017 and asset realised and settlements of liabilities as follows:

(a) The Realisation of the assets were as follows:

 

Sundry Debtors

52,000

Stock

42,000

Bills receivable

16,000

Machinery

49,000

(b) Investment was taken over by Gupta at agreed value of ₹ 36,000 and agreed to pay of Mrs. Gupta’s loan.

(c) The Sundry Creditors were paid off less 3% discount.

(d) The Realisation expenses incurred amounted to ₹ 1,200.

Journalise the entries to be made on the dissolution and prepare Realisation Account, Bank Account and Partners Capital Accounts.

 

Books of Gupta and Sharma

 

Journal

 

 

Date

Particulars

L.F.

Amount

Amount

2012

 

 

 

 

Dec. 31

Realisation A/c

Dr.

 

2,35,500

 

 

To Sundry Debtors A/c

 

 

 

55,000

 

To Stock A/c

 

 

 

44,000

 

To Bills Receivable A/c

 

 

 

19,000

 

To Machinery A/c

 

 

 

52,000

 

To Investment A/c

 

 

 

38,500

 

To Fixtures A/c

 

 

 

27,000

 

(Assets transferred to Realisation Account)

 

 

 

 

 

 

 

 

 

 

Dec. 31

Sundry Creditors A/c

Dr.

 

38,000

 

 

Mrs. Gupta’s Loan A/c

Dr.

 

20,000

 

 

Mrs. Sharma’s Loan A/c

Dr.

 

30,000

 

 

Provision for Doubtful Debts

Dr.

 

4,000

 

 

To Realisation A/c

 

 

 

92,000

 

(Liabilities transferred to Realisation Account)

 

 

 

 

 

 

 

 

 

 

Dec. 31

Bank A/c

Dr.

 

1,59,000

 

 

To Realisation A/c

 

 

 

1,59,000

 

(Assets realised: Sundry Debtors ₹ 52,000, Stock ₹ 42,000,

Bills Receivable ₹ 16,000, Machinery ₹ 49,000)

 

 

 

 

 

 

 

 

 

 

Dec. 31

Realisation A/c

Dr.

 

20,000

 

 

To Gupta’s Capital A/c

 

 

 

20,000

 

(Gupta took over Mrs. Gupta’s Loan)

 

 

 

 

 

 

 

 

 

 

Dec. 31

Gupta’s Capital A/c

Dr.

 

36,000

 

 

To Realisation A/c

 

 

 

36,000

 

(Investment taken over by Gupta)

 

 

 

 

 

 

 

 

 

 

 

Dec. 31

Realisation A/c

Dr.

 

66,860

 

 

To Bank A/c

 

 

 

66,860

 

(Liabilities paid: Mrs. Sharma’s Loan ₹ 30,000 and Creditors

₹ 38,000 paid off less 3% discount)

 

 

 

 

 

 

 

 

 

 

Dec. 31

Realisation A/c

Dr.

 

1,200

 

 

To Bank A/c

 

 

 

1,200

 

(Realisation expenses paid)

 

 

 

 

 

 

 

 

 

 

 

Dec. 31

Gupta’s Capital A/c

Dr.

 

18,280

 

 

Sharma’s Capital A/c

Dr.

 

18,280

 

 

To Realisation A/c

 

 

 

36,560

 

(Loss on Realisation transferred to Partners’ capital Account)

 

 

 

 

 

 

 

 

 

 

Dec. 31

Reserve Fund A/c

Dr.

 

6,000

 

 

To Gupta’s Capital A/c

 

 

 

3,000

 

To Sharma’s Capital A/c

 

 

 

3,000

 

(Reserve fund distributed among partners ratio)

 

 

 

 

 

 

 

 

 

 

Dec. 31

Gupta’s Capital A/c

Dr.

 

58,720

 

 

Sharma’s Capital A/c

Dr.

 

44,720

 

 

To Bank A/c

 

 

 

1,03,440

 

(Final payment made to partners)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realisation Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

Sundry Debtors

55,000

Sundry Creditors

38,000

Stock

44,000

Mrs. Gupta’s Loan

20,000

Bills Receivable

19,000

Mrs. Sharma’s Loan

30,000

Machinery

52,000

Provision for Doubtful Debts

4,000

Investment

38,500

Bank :

 

Fixtures

27,000

Sundry Debtors

52,000

 

Gupta’s Capital A/c (Mrs. Gupta Loan)

20,000

Stock

42,000

 

Bank A/c:

 

Bills Receivable

16,000

 

Creditors

36,860

 

Machinery

49,000

1,59,000

Mrs. Sharma’s Loan

30,000

 

Gupta’s Capital A/c (Investment)

36,000

Expense

1,200

68,060

Loss transferred to

 

 

 

 

Gupta’s Capital A/c

18,280

 

 

 

 

Sharma’s Capital A/c

18,280

36,560

 

 

 

 

 

 

 

3,23,560

 

3,23,560

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital Account

 

Dr.

 

Cr.

 

Particulars

Gupta

Sharma

Particulars

Gupta

Sharma

Realisation (Investment)

36,000

 

Balance b/d

90,000

60,000

Realisation (Loss)

18,280

18,280

Realisation (Mrs. Gupta Loan)

20,000

 

Bank

58,720

44,720

Reserve Fund

3,000

3,000

 

 

 

 

 

 

 

1,13,000

63,000

 

1,13,000

63,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

Balance b/d

12,500

Realisation 

68,060

Realisation (Assets realised)

1,59,000

(Payment of expenses and liabilities)

 

 

 

Gupta’s Capital A/c

58,720

 

 

Sharma’s Capital A/c

44,720

 

 

 

 

 

1,71,500

 

1,71,500

 

 

 

 

 

 

 

 

 

 

 

 

 

19. 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 December 31, 2017, when the balance sheet of the firm as under:

 

Balance Sheet of Ashok, Babu and Chetan as on December 31, 2017

 

 

Liabilities

Amount

Assets

Amount

Sundry Creditors

20,000

Bank

7,500

Bills payable

25,500

Sundry Debtors

58,000

Babu’s loan

30,000

Stock

39,500

Capital’s:

 

Machinery

48,000

Ashok

70,000

 

Investment

42,000

Babu

55,000

 

Freehold Property

50,500

Chetan

27,000

1,52,000

 

 

Current Accounts :

 

 

 

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 Investment for ₹ 40,000 and Freehold property was taken 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 Account, and Bank Account.

 

  

 

Realisation Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

Sundry Debtors

58,000

Sundry Creditors

20,000

Stock

39,500

Bills Payable

25,500

Machinery

48,000

Ashok’s Current  A/c (Investment)

40,000

Investment

42,000

Babu’s Current  A/c (Machinery)

45,000

Freehold property

50,500

Chetan’s Current A/c

55,000

Bank:

 

(Free hold property)

 

Sundry Creditors

18,600

 

Bank:

 

Bills payable

25,500

 

Sundry Debtors

56,500

 

Expenses

3,000

47,100

Stock

36,500

 

Profit Transferred to

 

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 Accounts

 

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

(Assets taken)

 

 

 

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 Accounts

 

Dr.

 

Cr.

 

Particulars

Ashok

Babu

Chetan

Particulars

Ashok

Babu

Chetan

Ashok’s Current

28,800

 

 

Balance b/d

70,000

55,000

27,000

Babu’s Current

 

39200

 

Bank

 

 

24,600

Chetan’s Current

 

 

51600

 

 

 

 

Bank

41,200

15,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

70,000

55,000

51,600

 

70,000

55,000

51,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Babu’s Loan A/c

Dr.

 

Cr.

Particulars

Amount

Particulars

Amount

Cash A/c

30,000

Balance b/d

30,000

 

 

 

 

 

30,000

 

30,000

 

 

 

 

 

Bank Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

Balance b/d

7,500

Realisation  (Payment of Expenses

47,100

Realisation  (Assets realised )

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

 

 

 

 

 

 

 

 

 

 

 

 

 

20. The following is the Balance sheet of Tanu and Manu, who shares profit and losses in the ratio of 5:3, On December 31, 2017:

 

Balance Sheet of Tanu and Manu as on December 31, 2017

 

 

Liabilities

Amount

Assets

Amount

Sundry Creditors

 

62,000

Cash at Bank

16,000

Bills Payable

 

32,000

Sundry Debtors

55,000

Bank Loan

 

50,000

Stock

75,000

Reserve fund

 

16,000

Motor car

90,000

Capital:

 

 

Machinery

45,000

Tanu

1,10,000

 

Investment

70,000

Manu

90,000

2,00,000

Fixtures

9,000

 

 

3,60,000

 

3,60,000

 

 

 

 

 

 

 

 

 

 

 

 

On the above date the firm is dissolved and the following agreement was made: Tanu agree to pay the bank loan and took away the sundry debtors. Sundry creditors accepts stock and paid ₹ 10,000 to the firm. Machinery is taken over by Manu for ₹ 40,000 and agreed to pay of bills payable at a discount of 5%.. Motor car was taken over by Tanu for ₹ 60,000. Investment realised ₹ 76,000 and fixtures ₹ 4,000. The expenses of dissolution amounted to ₹ 2,200.

Prepare Realisation Account, Bank Account and Partners Capital Accounts.

 

 

 

 Books of Tanu and Manu

 

Realisation Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

Sundry Debtors

55,000

Sundry Creditors

62,000

Stock

75,000

Bills Payable

32,000

Motor Car

90,000

Bank Loan

50,000

Machinery

45,000

Tanu’s Capital A/c:

 

Investment

70,000

Sundry Debtors

55,000

 

Fixtures

9,000

Motor Car

60,000

1,15,000

Manu’s Capital A/c  (Bills Payable)

30,400

Bank:

 

Bank  (Expenses)

2,200

Stock

10,000

 

Tanu’s Capital A/c (Bank Loan)

50000

Investment

76,000

 

 

 

Fixtures

4,000

90,000

 

 

Manu’s Capital (Machinery)

40,000

 

 

Loss transferred to

 

 

 

Manu’s Capital A/c

23,500

 

 

 

Manu’s Capital A/c

14,100

37,600

 

 

 

 

 

4,26,600

 

4,26,600

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital Account

 

Dr.

 

Cr.

 

Particulars

Tanu

Manu

Particulars

Tanu

Manu

Realisation (Assets taken)

1,15,000

40,000

Balance b/d

1,10,000

90,000

Realisation  (Loss)

23,500

14,100

Realisation  (Liabilities)

50,000

30,400

Bank

31,500

72,300

Reserve Fund

10,000

6,000

 

 

 

 

 

 

 

1,70,000

1,26,400

 

1,70,000

1,26,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank Account

 

Dr.

 

Cr.

 

Particulars

Amount

Particulars

Amount

Balance b/d

16,000

Realisation (Expenses)

2,200

Realisation (Assets)

90,000

Tanu’s Capital A/c

31,500

 

 

Manu’s Capital A/c

72,300

 

 

 

 

 

1,06,000

 

1,06,000

 

 

 

 

 

 

 

 

 

 

 

Concepts covered in this chapter –

  • Dissolution of partnership
  • Dissolution of a firm
  • Settlement of Accounts
  • Accounting treatment

Conclusion

NCERT solutions for class 12 Accountancy chapter 5 provides a wide degree of illustrative examples; which assists the students to comprehend and learn quickly. The above mentioned are the illustrations for class 12 CBSE syllabus. For more solutions and study materials of NCERT solutions for class 12 Accountancy visit BYJU’S or download the app for more information.

Leave a Comment

Your email address will not be published. Required fields are marked *