Question

A, B and C decided to dissolve the partnership firm. The position as at 31st March, 2012, the date of dissolution, was as follows:

$\begin{array}{cccc}\text{Capital and Liabilities}& \text{Amount (Rs.)}& \text{Assets}& \text{Amount (Rs.)}\\ \text{Creditors}& 2,75,000& \text{Furniture}& 5,000\\ \text{A's Loan Account}& 30,000& \text{Stock}& 1,75,000\\ \text{Capital Accounts:}& & \text{Debtors}& 2,40,000\\ A1,00,000& & \text{Bills Receivables}& 30,000\\ B50,000& & \text{Cash}& 10.000\\ C\underset{–}{5,000}& 1,55,000& & \\ & \underset{–}{\overline{4,60,000}}& & \underset{–}{\overline{4,60,000}}\end{array}$

They share profit and losses in the ratio of $A:\frac{1}{2};B:\frac{3}{10}\text{and}C:\frac{1}{5}.$
Rs. 20,000 of the debtors proved bad; the bills receivables were realised in full; the stock realised Rs. 1,70,000; Furniture was taken over by B at Book value and the expenses of Realisation amounted to Rs. 20,000.

Prepare realisation account.

Answer 1

$\text{Dr.}\text{REALISATION ACCOUNT}\text{Cr.}$
$\begin{array}{cccc}\text{Particulars}& \text{Amount (Rs.)}& \text{Particulars}& \text{Amount (Rs.)}\\ \text{Furniture}& 5,000& \text{Creditors}& 2,75,000\\ \text{Stock}& 1,75,000& \text{A's Loan A/c}& 30,000\\ \text{Debtors}& 2,40,000& \text{Bank A/c (Assets realised):}& \\ \text{Bills Receivables}& 30,000& \text{Debtors}& \\ \text{Bank (Expenses paid)}& 20,000& (2,40,000-20,000)2,20,000& \\ \text{Bank A/c (Creditors paid)}& 2,75,000& \text{Bills Receivables}30,000& \\ \text{Bank A/c (A's Loan)}& 30,000& \text{Stock}\underset{–}{1,70,000}& 4,20,000\\ & & \text{B's Capital A/c}& \\ & & \text{(Furniture taken)}& 5,000\\ & & \text{Capital A/cs:}& \\ & & \text{(Loss transferred)}& \\ & & \text{A's Capital A/c}22,500& \\ & & \text{B's Capital A/c}13,500& \\ & & \text{C's Capital A/c}\underset{–}{9,000}& 45,000\\ & \underset{–}{\overline{7,75,000}}& & \underset{–}{\overline{7,75,000}}\end{array}$

Note:
If nothing is mentioned in the question about the payment of outside liabilities, it is assumed that these are paid in full. Hence Creditors and A's Loan are to be paid in full in this question.