Question

A and B were partners in a firm sharing profits in the ratio of 3 : 2. On 31.3.2011 the balance sheet of the firm was as follows:

BALANCE SHEET OF A & B
as at 31.3.2011
$\begin{array}{cccc}\text{Capital and Liabilities}& \text{Amount (Rs.)}& \text{Assets}& \text{Amount (Rs.)}\\ \text{Capital:}& & \text{Building}& 2,40,000\\ A3,00,000& & \text{Furniture}& 1,75,000\\ B\underset{–}{2,00,000}& 5,00,000& \text{Debtors}& 80,000\\ \text{Sundry Creditors}& 97,000& \text{Stock}& 75,000\\ \text{A's Loan}& 20,000& \text{Cash}& 47,000\\ & \underset{–}{\overline{6,17,000}}& & \underset{–}{\overline{6,17,000}}\end{array}$

The firm was dissolved on 1.4.2011 and the assets and liabilities were settled as following:

(i) Building was taken over by the creditors as their full and final payment;

(ii) A accepted an unrecorded asset of Rs. 25,000 in full settlement of his loan.

(iii) Furniture was taken over by B for cash payment at 5% less than the book value;

(iv) Debtors were collected by a debt collection agency at a cost of Rs 5,000;

(v) Stock realised Rs. 70,500.

(vi) B agreed to bear all realisation expenses. For this service B is to be allowed Rs. 500. Actual expenses on realisation amounted to Rs. 1,000.

Prepare realisation account an partner's capital account

Answer 1

$\text{Dr.}\text{REALISATION ACCOUNT}\text{Cr.}$
$\begin{array}{cccc}\text{Particulars}& \text{Amount (Rs.)}& \text{Particulars}& \text{Amount (Rs.)}\\ \text{Building A/c}& 2,40,000& \text{Sundry Creditors A/c}& 97,000\\ \text{Furniture A/c}& 1,75,000& \text{A's Loan A/c}& 20,000\\ \text{Debtors A/c}& 80,000& \text{Cash A/c (Furniture)}& 1,66,250\\ \text{Stock A/c}& 75,000& \text{Cash A/c (Debtors)}& 75,000\\ \text{B's Capital A/c}& & \text{Cash A/c (Stock)}& 70,500\\ \text{(Realisation Expenses)}& 500& \text{Loss on Realisation}& \\ & & \text{transferred to:}& \\ & & \text{A's Capital A/c}85,050& \\ & & \text{B's Capital A/c}\underset{–}{56,700}& 1,41,750\\ & \underset{–}{\overline{5,70,500}}& & \underset{–}{\overline{5,70,500}}\end{array}$

$\text{Dr.}\text{PARTNER'S CAPITAL ACCOUNTS}\text{Cr.}$
$\begin{array}{cccccc}\text{Particulars}& A(Rs.)& B(Rs.)& \text{Particulars}& A(Rs.)& B(Rs.)\\ \text{Realisation A/c}& & & \text{Balance b/d}& 3,00,000& 2,00,000\\ \text{(Loss)}& 85,050& 56,700& \text{Realisation A/c}& & \\ \text{Cash A/c}& & & \text{(Realisation Exp.)}& -& 500\\ \text{(Final settlement)}& 2,14,950& 1,43,800& & & \\ & \underset{–}{\overline{3,00,000}}& \underset{–}{\overline{2,00,500}}& & \underset{–}{\overline{3,00,000}}& \underset{–}{\overline{2,00,500}}\end{array}$

Working Note:

1. No entry is to be passed for building taken over by the creditors.

2. No entry is passed for lon settlement with unrecorded asset.