Question

A, B and C are partners in a firm sharing profits and losses in the ratio of $\frac{1}{2}:\frac{1}{3}:\frac{1}{6}.$ On 31st March, 2014 their balance sheet was as follows :

$\begin{array}{cccccc}\text{Capital and Liabilities}& & \text{Amount (Rs.)}& \text{Assets}& & \text{Amount (Rs.)}\\ \text{Sundry Creditors}& & 24,500& \text{Plant}& & 50,000\\ \text{Mrs. C's Loan}& & 20,000& \text{Freehold Property}& & 1,12,000\\ \text{Workmen Compensation Reserve}& & 12,000& \text{Patents}& & 6,000\\ \text{Capital Accounts :}& & & \text{Stock}& & 40,000\\ \text{A}& 1,00,000& & \text{Sundry Debtors}& 40,000& \\ \text{B}& 80,000& & \text{Less : Provision}& \underset{–}{1,500}& 38,500\\ \text{C}& \underset{–}{40,000}& 2,20,000& \text{Prepaid Expenses}& & 2,000\\ & & & \text{Cash at Bank}& & 28,000\\ & & \overline{\underset{–}{\underset{–}{2,76,500}}}& & & \overline{\underset{–}{\underset{–}{2,76,500}}}\end{array}$

It was decided to dissolve the firm, A agreeing to take over the business (except cash at bank) at the following valuations :

Plant at a depreciation of 20%; Freehold Property at Rs 1,50,000; Goodwill at Rs 10,000; Patents at book value; Sundry Debtors at Rs 35,000(Net); Half the Stock at 30% more than its book value and the remaining half at 50% less than the book value.

Mrs. C's loan was to be repaid and the Creditors were proved at Rs 22,000 and were taken over by A. Expenses of dissolution came to Rs 1,000.

Close the books of the firm and prepare the realisaion account

Answer 1

$\begin{array}{cccccccc}\text{Dr.}& & & & & \text{REALISATION ACCOUNT}& & \text{Cr.}\end{array}$

$\begin{array}{cccccc}\text{Particulars}& & \text{Amount (Rs.)}& \text{Particulars}& & \text{Amount (Rs.)}\\ \text{Plant}& & 50,000& \text{Provision for Doubtful Debts}& & 1,500\\ \text{Freehold Property}& & 1,12,000& \text{Sundry Creditors}& & 24,500\\ \text{Patents}& & 6,000& \text{Mrs. C's Loan}& & 20,000\\ \text{Stock}& & 40,000& \text{A's Capital A/c :}& & \\ \text{Sundry Debtors}& & 40,000& \text{Plant}& 40,000& \\ \text{Prepaid Expenses}& & 2,000& \text{Freehold Property}& 1,50,000& \\ \text{Bank (Mrs. C's Loan)}& & 20,000& \text{Goodwill}& 10,000& \\ \text{Bank (Expenses)}& & 1,000& \text{Patents}& 6,000& \\ \text{Capital A/c :}& & & \text{Sundry Debtors}& 35,000& \\ \text{(Profit on realisation)}& & & \text{Stock}& 36,000& \\ A\frac{1}{2}& 15,000& & & \overline{2,77,000}& \\ & & & \text{Less : Creditors}& \underset{–}{22,000}& 2,55,000\\ B\frac{1}{3}& 10,000& & & & \\ C\frac{1}{6}& \underset{–}{5,000}& 30,000& & & \\ & & \overline{\underset{–}{\underset{–}{3,01,000}}}& & & \overline{\underset{–}{\underset{–}{3,01,000}}}\end{array}$