Question

A, B and C sharing profits equally, dissolved their firm on 30th June 2013, on which date their Balance Sheet was as follows :

$\begin{array}{cccc}\text{Capital and Liabilities}& \text{Amount (Rs.)}& \text{Assets}& \text{Amount (Rs.)}\\ \text{Sundry Creditors}& 31,000& \text{Bank}& 6,300\\ \text{Reserve for Contingency}& 18,000& \text{Debtors}& 55,000\\ \text{Profit \& Loss A/c}& 12,000& \text{Stock}& 81,000\\ \text{A's Wife Loan}& 12,000& \text{Furniture}& 20,000\\ \text{Bank Loan at}12\%& 20,000& \text{Plant}& 53,700\\ \text{Capital A/cs : A}& 60,000& \text{Current Account : C}& 22,000\\ \text{B}& 50,000& & \\ \text{C}& 20,000& & \\ \text{Current A/cs :}& & & \\ \text{A}& 10,000& & \\ \text{B}& 5,000& & \\ & \overline{\underset{–}{\underset{–}{2,38,000}}}& & \overline{\underset{–}{\underset{–}{2,38,000}}}\end{array}$

(1) There is a bill for Rs. 5,000 under discount. This bill was received from 'R'. R proved insolvent and 60% were received from his estate.

(2) It was found that an investment not recorded in the books is worth Rs. 8,000. This is taken over by one of the creditors at this value.

(3) A agreed to accept furniture in full settlement of his wife's loan.

(4) Bank Loan was repaid alongwith interest for nine months.

(5) Assets realised as follows : Debtors Rs 24,500; Stock Rs 60,000; Plant Rs 28,000. Prepare necessary accounts.

Answer 1

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

$\begin{array}{cccc}\text{Particulars}& \text{Amount (Rs.)}& \text{Particulars}& \text{Amount (Rs.)}\\ \text{Debtors}& 55,000& \text{Sundry Creditors}& 31,000\\ \text{Stock}& 81,000& \text{A's Wife Loan}& 12,000\\ \text{Furniture}& 20,000& \text{Bank Loan at}12\%& 20,000\\ \text{Plant}& \text{53,700}& \text{Bank (Assets realised)}& 1,12,500\\ \text{Bank (payment for}& & \text{Bank A/c (Recovery from B/R}& \\ \text{bill discounted)}& 5,000& \text{dishonoured})& 3,000\\ \text{Bank (Payment to}& & \text{Loss transferred to :}& \\ \text{Creditors Rs 31,000}& & \text{A's Current A/c}27,000& \\ \text{Less : Rs 8,000)}& 23,000& \text{B's Current A/c}27,000& \\ \text{Bank (payment of Bank Loan)}& 21,800& \text{C's Current A/c}\underset{–}{27,000}& 81,000\\ & \overline{\underset{–}{\underset{–}{2,59,500}}}& & \overline{\underset{–}{\underset{–}{2,59,500}}}\end{array}$

$\begin{array}{ccccccc}\text{Dr}& & & & \text{CURRENT ACCOUNTS}& & \text{Cr}\end{array}$

$\begin{array}{cccccccc}\text{Particulars}& \text{A}& \text{B}& \text{C}& \text{Particulars}& \text{A}& \text{B}& \text{C}\\ & \text{Rs}& \text{Rs}& \text{Rs}& & \text{Rs}& \text{Rs}& \text{Rs}\\ \text{Bal. b/d}& -& -& 22,000& \text{Bal. b/d}& 10,000& 5,000& -\\ \text{Realisation}& & & & \text{Reserve for}& & & \\ \text{A/c (Loss)}& 27,000& 27,000& 27,000& \text{contingency}& 6,000& 6,000& 6,000\\ & & & & \text{P}\&\text{L A/c}& 4,000& 4,000& 4,000\\ & & & & \text{Capital A/c}& & & \\ & & & & \text{(transfer)}& 7,000& 12,000& 39,000\\ & \overline{\underset{–}{\underset{–}{27,000}}}& \overline{\underset{–}{\underset{–}{27,000}}}& \overline{\underset{–}{\underset{–}{49,000}}}& & \overline{\underset{–}{\underset{–}{27,000}}}& \overline{\underset{–}{\underset{–}{27,000}}}& \overline{\underset{–}{\underset{–}{49,000}}}\end{array}$

$\begin{array}{cccccccc}\text{Dr.}& & & & \text{CAPITAL ACCOUNTS}& & & \text{Cr.}\end{array}$

$\begin{array}{cccccccc}\text{Particulars}& \text{A}& \text{B}& \text{C}& \text{Particulars}& \text{A}& \text{B}& \text{C}\\ & \text{Rs}& \text{Rs}& \text{Rs}& & \text{Rs}& \text{Rs}& \text{Rs}\\ \text{Current A/c}& & & & \text{Bal. b/d}& 60,000& 50,000& 20,000\\ \text{Transfer}& 7,000& 12,000& 39,000& \text{Bank A/c}& & & \\ \text{Bank A/c}& & & & \text{(Deficit brought}& & & \\ \text{(Final payment)}& 53,000& 38,000& & \text{in)}& & & 19,000\\ & \overline{\underset{–}{\underset{–}{60,000}}}& \overline{\underset{–}{\underset{–}{50,000}}}& \overline{\underset{–}{\underset{–}{39,000}}}& & \overline{\underset{–}{\underset{–}{60,000}}}& \overline{\underset{–}{\underset{–}{50,000}}}& \overline{\underset{–}{\underset{–}{39,000}}}\end{array}$

$\begin{array}{ccccccc}\text{Dr.}& & & & \text{BANK ACCOUNTS}& & \text{Cr.}\end{array}$

$\begin{array}{cccc}\text{Particulars}& \text{Amount (Rs.)}& \text{Particulars}& \text{Amount (Rs.)}\\ \text{Balance b/d}& 6,300& \text{Realisation A/c}& \\ \text{Realisation A/c}& & \text{(Bill discounted)}& 5,000\\ \text{(Assets realised)}& 1,12,500& \text{Realisation A/c}& \\ \text{Realisation A/c (Recovery}& & \text{(Creditors)}& 23,000\\ \text{from B/R dishonoured)}& 3,000& \text{Realisation A/c}& \\ \text{C's Capital A/c}& 19,000& \text{(Bank Loan)}& 21,800\\ & & \text{A's Capital A/c}& 53,000\\ & & \text{B's Capital A/c}& 38,000\\ & \overline{\underset{–}{\underset{–}{1,40,800}}}& & \overline{\underset{–}{\underset{–}{1,40,800}}}\end{array}$

Notes : (1) The firm has to pay Rs 5,000 to the bank for the dishonour of the discounted bill, of which 60% i.e. Rs 3,000 has been received from R. Following entries will be passed for it :

(i) Bank A/c Dr. 3,000

To Realisation A/c 3,000

(iii) Realisation A/c Dr. 5,000

To Bank A/c 5,000

(2) No separate entry will be passed for the Investments of Rs 8,000, as these are taken over by the Creditors. Creditors will be paid at the net figure of Rs 31,000 - Rs 8,000 = Rs 23,000.

(3) Wife's Loan has not been paid in Cash. It has been settled by giving away furniture. Therefore, no entry will be passed for the discharge of Wife's Loan.

(4) When partner's Current Accounts are given in the question, it means that the capitals are fixed. In such a case profit or loss on realisation, accumulated profits and reserves should be transferred to Current Accounts.