Question

PRACTICAL PROBLEMS

Ganesh and Chandan were partners sharing profits and losses in the proportion of 3:2. They dissolve the partnership firm on 31^st March, 2011 when their position was as follows:

Balance Sheet as on 31st March, 2011
Liabilities	Amount Rs	Assets		Amount Rs
Sundry Creditors	25,000	Debtors	1,12,500
Bank overdraft	20,000	Less: R.D.D.	12,500	1,00,000
Reserve Fund	30,000	Stock		2,25,000
Capital Accounts:		Furniture		50,000
Ganesh	2,30,000	Motor Car		75,000
Chandan	1,50,000	Cash in hand		5,000
	4,55,000			4,55,000

The Assets realised as follows: Debtors Rs 90,000, Stock Rs 2,00,000, and Goodwill Rs 25,000, Motor Car was taken over by Ganesh for Rs 70,000 and Furniture by Chandan for Rs 60,000.
The Creditors were paid Rs 22,500 in full settlement. The expenses of realisation amounted to Rs 10,000.

Pass necessary journal entries in the books of the firm.

Answer 1

	Journal Entry
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Realisation A/c	Dr.		4,62,500
		To Debtors A/c				1,12,500
		To Stock A/c				2,25,000
		To Furniture A/c				50,000
		To Motor Car A/c				75,000
		(Assets transferred to Realisation A/c)
		Sundry Creditors A/c	Dr.		25,000
		Reserve for Doubtful Debts A/c	Dr.		12,500
		To Realisation A/c				37,500
		(Liabilities transferred to Realisation A/c)
		Cash A/c	Dr.		3,15,000
		To Realisation A/c				3,15,000
		(Assets realised)
		Ganesh’s Capital A/c	Dr.		70,000
		To Realisation A/c				70,000
		(Motor Van taken over by Ganesh)
		Chandan’s Capital A/c	Dr.		60,000
		To Realisation A/c				60,000
		(Furniture taken over by Chandan)
		Realisation A/c	Dr.		32,500
		To Cash A/c				32,500
		(Realisation expenses and creditors are paid off)
		Ganesh’s Capital A/c	Dr.		7,500
		Chandan’s Capital A/c	Dr.		5,000
		To Realisation A/c				12,500
		(Loss transferred to Partner’s Capital A/c)
		Reserve Fund A/c			30,000
		To Ganesh’s Capital A/c				18,000
		To Chandan’s Capital A/c				12,000
		(Reserve Fund transferred to Partner’s Capital A/c)
		Bank Overdraft A/c	Dr.		20,000
		To Cash A/c				20,000
		(Bank overdraft transferred to Cash A/c)
		Ganesh’s Capital A/c	Dr.		1,70,500
		Chandan’s Capital A/c	Dr.		97,000
		To Cash A/c				2,67,500
		(Amount paid off on account of final settlement)

Note: As per the book the amounts paid to Ganesh and Chandan are Rs 1,72,500 and Rs 95,000, respectively, however, as per the solution above these balances should be Rs 1,70,500 and Rs 97,000, respectively.