Question

L, M and N entered into partnership on 1st July 2012 sharing in the ratio of 4 : 3 : 3. Their capitals were Rs. 60,000; Rs. 40,000 and Rs. 30,000 respectively. They decided to dissolve on 30th June 2013, on which date their position was:

Bank Rs. 7,000; Debtors Rs. 40,000; B/R Rs. 5,500; Stock Rs. 43,000; Furniture Rs. 2,500; Creditors Rs. 15,000 and B/P Rs. 5,000.

L took over Debtors at 25% discount and took over the liabilities of the payment to creditors.
M took over stock at Rs 13,000.
N takes B/R at Rs. 5,000 and furniture at 12% depreciation.
B/P were due after 2 months; As such, a rebate of 18% p.a. was received on their payment.
10% p.a. interest to be credited to each partner on his capital. Prepare necessary accounts.

Answer 1

If a Balance Sheet in proper form is not given in the question, first of all, a Balance Sheet should be prepared to find out any missing figure therein:

BALANCE SHEET
(as at 30th June, 2013)

$\begin{array}{cccc}\text{Capital and Liabilities}& \text{Amt. (Rs.)}& \text{Assets}& \text{Amt. (Rs.)}\\ \text{Sundry Creditors}& 15,000& \text{Bank Balance}& 7,000\\ \text{Bills Payable}& 5,000& \text{Debtors}& 40,000\\ \text{Capitals:}& & \text{Bills Receivable}& 5,500\\ L60,000& & \text{Stock}& 43,000\\ M40,000& & \text{Furniture}& 2,500\\ N\underset{–}{30,000}& 1,30,000& \text{Profit \& Loss (Balancing figure}& \\ & & \text{is assumed as loss)}& 52,000\\ & \underset{–}{\overline{1,50,000}}& & \underset{–}{\overline{1,50,000}}\end{array}$

Note: Interest on capital is allowed only in case of profits. In this question, there is loss of Rs. 52,000, as such, interest on capital will not be allowed.

$\text{Dr.}\text{REALISATION A/C}\text{Cr.}$
$\begin{array}{cccc}\text{Particulars}& \text{Rs}& \text{Particulars}& \text{Rs}\\ \text{Debtors}& 40,000& \text{Sundry Creditors}& 15,000\\ \text{Bills Receivable}& 5,500& \text{Bills Payable}& 5,000\\ \text{Stock}& 43,000& \text{L's Capital A/c (Debtors)}& 30,000\\ \text{Furniture}& 2,500& \text{M's Capital A/c (Stock)}& 13,000\\ \text{L's Capital A/c (Creditors)}& 15,000& \text{N's Capital A/c}& \\ \text{Bank A/c (B/P paid)}& 4,850& \text{(B/R and Furniture)}& 7,200\\ & & \text{Loss transferred to:}& \\ & & L16,260& \\ & & M12,195& \\ & & N\underset{–}{12,195}& 40,650\\ & \underset{–}{\overline{1,10,850}}& & \underset{–}{\overline{1,10,850}}\end{array}$

$\text{Dr.}\text{CAPITAL ACCOUNTS}\text{Cr.}$
$\begin{array}{cccccccc}\text{Particulars}& \text{L (Rs.)}& \text{M (Rs.)}& \text{N (Rs.)}& \text{Particulars}& \text{L (Rs.)}& \text{M (Rs)}& \text{N (Rs)}\\ \text{P \& L A/c}& 20,800& 15,600& 15,600& \text{Balance b/d}& 60,000& 40,000& 30,000\\ & & & & \text{Realisation}& 15,000& & \\ \text{Realisation}& & & & \text{(Creditors)}& & & \\ \text{(Assets Taken)}& 30,000& 13,000& 7,200& \text{Bank A/c (Bal. fig.)}& & 795& 4,995\\ \text{Realisation}& & & & & & & \\ \text{(Loss)}& 16,260& 12,195& 12,195& & & & \\ \text{Bank A/c (Bal. fig.)}& 7,940& & & & & & \\ & \underset{–}{\overline{75,000}}& \underset{–}{\overline{40,795}}& \underset{–}{\overline{34,995}}& & \underset{–}{\overline{75,000}}& \underset{–}{\overline{40,795}}& \underset{–}{\overline{34,995}}\end{array}$

$\text{Dr.}\text{BANK ACCOUNTS}\text{Cr.}$
$\begin{array}{cccc}\text{Particulars}& \text{Rs}& \text{Particulars}& \text{Rs}\\ \text{Bal. b/d}& 7,000& \text{Realisation (B/P)}& 4,850\\ \text{M's Capital A/c}& 795& \text{L's Capital A/c}& 7,940\\ \text{N's Capital A/c}& 4,995& & \\ & \underset{–}{\overline{12,790}}& & \underset{–}{\overline{12,790}}\end{array}$