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Question

Achal and Vichal were partners in a firm sharing profits in the ratio of 3 : 5 . On 31st March, 2018 their Balance Sheet was as follows:

Liabilities

Assets

Capital A/cs:

Land and Building

4,00,000
Achal
3,00,000

Machinery

3,00,000
Vichal 5,00,000 8,00,000 Debtors 2,22,000
1,79,000 Cash at Bank 78,000
21,000

10,00,000

10,00,000


The firm was dissolved on 1st April,2018 and the Assets and Liabilities were settled as follows :
(a) Land and Building b realised ₹ 4,30,000.
(b) Debtors realised ₹ 2,25,000 (with interest) and ₹ 1,000 were recovered for Bad Debts written off last year .
(c) There was an Unrecorded Investment which was sold for ₹ 25,000.
(d) Vichal took over Machinery at ₹ 2,80,000 for cash.
(e) 50% of the Creditors were paid ₹ 4,000 less in full settlement and the remaining Creditors were paid full amount .
Pass necessary journal entries for dissolution of the firm.

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Solution

Journal
Date
Particulars
L.F.
Debit
Amount
Rs
Credit Amount
Rs
Realisation A/c
Dr.
9,22,000
To Land & Building A/c
4,00,000
To Machinery A/c
3,00,000
To Debtors A/c
2,22,000
(Being assets transferred)
Creditors A/c
Dr.
1,79,000
Employees’ Provident Fund A/c
Dr.
21,000
To Realisation A/c
2,00,000
(Being liabilities transferred)
Bank A/c
Dr.
4,30,000
To Realisation A/c
4,30,000
(Being Land & Building realised)
Bank A/c (2,25,000 + 1,000)
Dr.
2,26,000
To Realisation A/c
2,26,000
(Being Debtors realised along-with Bad-debts recovered)
Bank A/c
Dr.
25,000
To Realisation A/c
25,000
(Being Unrecorded Investments sold)
Bank A/c
Dr.
2,80,000
To Realisation A/c
2,80,000
(Being Machinery took over by Vichal for Cash)
Realisation A/c
Dr.
1,96,000
To Bank A/c (85,500 + 89,500 + 21,000)
1,96,000
(Being 50% Creditors of Rs 89,500 were paid at a discount of Rs 4,000 and remaining 50% were settled in full and EPF)
Realisation A/c
Dr.
43,000
To Achal’s Capital A/c
16,125
To Vichal’s Capital A/c
26,875
(Being profits on realisation transferred)
Achal’s Capital A/c
Dr.
3,16,125
Vichal’s Capital A/c
Dr.
5,26,875
To Bank A/c
8,43,000
(Being Partners paid off)

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