A and B are partners in a firm sharing profits and losses in the ratio of 2 : 1. On 31st March, 2019, their Balance Sheet was:

Liabilities Amount
(₹) Assets Amount
(₹)

Bank Overdraft 30,000 Cash in Hand 6,000

General Reserve 56,000 Bank Balance 10,000

Investments Fluctuation Reserve 20,000 Sundry Debtors 26,000

A's Loan 34,000 Less: Provision for Doubtful Debtors 2,000 24,000

Capital A/c:

A 50,000 Investments 40,000

Stock 10,000

Furniture 10,000

Building 60,000

B's Capital 30,000

1,90,000 1,90,000

On that date, the partners decide to dissolve the firm. A took over Investments at an agreed valuation of ₹ 35,000. Other assets were realised as follows:
Sundry Debtors: Full amount. The firm could realise Stock at 15% less and Furniture at 20% less than the book value. Building was sold at ₹ 1,00,000.
Compensation to employees paid by the firm amounted to ₹ 10,000. This liability was not provided for in the above Balance Sheet.
You are required to close the books of the firm by preparing Realisation Account, Partners' Capital Accounts and Bank Account.

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Solution

Realisation Account

Dr.

Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

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
Employees

10,000

Sundry Debtors

26,000

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 (Investment)

35,000

General Reserve A/c

37,333

18,667

Bank A/c

81,333

3,167

Realisation A/c (Profit )

29,000

14,500

1,16,333

33,167

1,16,333

33,167

A’s Loan Account

Dr.

Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

Balance b/d

34,000

Bank A/c

34,000

34,000

34,000

Bank Account

Dr.

Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

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

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Similar questions

Q. A and B are partners in a firm sharing profits and losses in the ratio of 2 : 1 . On 31st March, 2018 , their Balance Sheet was:


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:		Investments		40,000
A	50,000	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 .

Q. Following is the Balance Sheet of Vishnu, Sanjiv and Sudhir as at 31st March, 2018:

Liabilities		Amount (₹)	Assets		Amount (₹)
Bills Payable		20,000	Cash		8,000
Creditors		18,000	Bills Receivable		12,000
Mrs. Vishnu's Loan		20,000	Stock		25,000
Outstanding Salary		5,000	Sundry Debtors	40,000
Profit and Loss A/c		10,000	Less: Provision for D. Debts	4,000	36,000
Workmen Compensation Reserve		15,000
Capital A/cs:			Land and Building		50,000
Vishnu	40,000		Furniture		10,000
Sanjiv	30,000		Computers		5,000
Sudhir	18,000	88,000	Investments		30,000

		1,76,000			1,76,000

Profit-sharing ratio of the partners is 5 : 3 : 2 . At the above date, the partners decided to dissolve the firm .
The assets were realised as follows:
Bill Receivable were realised at a discount of 5% . All Debtors were good. Stock realised ₹ 22,000. Land and Building realised 40% higher than the book value . Furniture was sold for ₹ 8,000 by auction and auctioneer's commission amounted to ₹ 500.
Computers were taken by Vishnu for ana greed valuation of ₹ 3,000. Investments were sold in the open market at a price of ₹ 45,000 , for which commission of ₹ 600 was paid to the broker.
Bills Payable were paid at full amount . Creditors , however, agreed to accept 10% less. All other liabilities were paid off at their book value.
The firm retrenched their employees three months before the dissolution of the firm and firm had to pay ₹ 20,000 as compensation.
Prepare Realisation Account , Partners' Capital Accounts and Cash Account.

Q. 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
Liabilities		Amount (₹)	Assets	Amount (₹)
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 LossA/C	7,500



		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.

Q. A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2 . On 31st March, 2018, their Balance Sheet was as follows:


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 LossA/C	7,500



		86,000		86,000

The firm was dissolved on 31st March, 2018 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 .

Q. P, Q and R were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. They agreed to dissolve their partnership firm on 31st March, 2019. P was deputed to realise the assets and pay the liabilities. He was paid ₹ 1,000 as commission for his services. The financial position of the firm was:

	Balance Sheet as at 31st March, 2019
Liabilities			Amount (₹)	Assets		Amount (₹)
Creditors			10,000	Stock		5,500
Bills Payable			3,700	Investments		15,000
Investments Fluctuation Reserve			4,500	Debtors	7,100
Capital A/cs:				Less: Provision for Doubtful Debtors	450	6,650
P		37,550		Cash		5,600
Q		15,000	52,550	R's Capital A/c		8,000
				Plant and Machinery		30,000

			70,750			70,750

P took over Investments for ₹ 12,500. Stock and Debtors realised ₹ 11,500. Plant and Machinery were sold to Q for ₹ 22,500 for cash. Unrecorded assets realised ₹ 1,500. Realisation expenses paid amounted to ₹ 900.
Prepare necessary Ledger Accounts to close the books of the firm.

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A’s Loan Account
Dr.				Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
		Balance b/d	34,000
Bank A/c	34,000
	34,000		34,000

Realisation Account
Dr.							Cr.
Particulars			Amount (₹)	Particulars		Amount (₹)
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 Employees		10,000		Sundry Debtors	26,000
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 (Investment)	35,000		General Reserve A/c	37,333	18,667
Bank A/c	81,333	3,167	Realisation A/c (Profit )	29,000	14,500

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

Bank Account
Dr.				Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
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