Question

PRACTICAL PROBLEMS

(When one partner becomes insolvent)

Rahul, Rohit and Ramesh were partners in a firm sharing profit and losses in the ratio of 2:2:1 respectively.
The Balance Sheet as on 31^st March, 2012 was as follows:

Balance Sheet as on 31st December, 2011
Liabilities	Amount Rs	Assets		Amount Rs
Sundry Creditors	20,000	Cash at Bank		8,000
Bills payable	5,000	Stock		20,000
General Reserve	6,000	Debtors	16,000
Rahul’s Loan A/c	16,000	Less: R.D.D.	1,000	15,000
Capital Account		Plant and Machinery		30,000
Rahul	25,000	Furniture		6,000
Rohit	10,000	Ramesh’s Capital A/c		3,000
	82,000			82,000

The firm was dissolved on the above date:

1) The Assets realised as follows:

Debtors Rs 9,000, Plant and Machinery Rs 26,000, Stock Rs 14,000 and Furniture Rs 3,000.

2) The Creditors were paid Rs 18,000 in full settlement and the bills payable were paid in full.

3) The realisation expenses amounted to Rs 3,000.

4) Ramesh become insolvent and was able to bring in only Rs 1,800 from his private estate.

Prepare:

1) Realisation A/c

2) Bank A/c and

3) Partner’s Capital A/c

Answer 1

Realisation Account
Dr.	Cr.
Particulars			Amount Rs	Particulars		Amount Rs
Sundry Assets:				Sundry Liabilities:
Debtors		16,000		Sundry Creditors	20,000
Stock		20,000		Bills Payable	5,000
Plant and Machinery		30,000		Reserve for Doubtful Debts	1,000	26,000
Furniture		6,000	72,000
				Bank A/c:
Bank A/c:				Debtors	9,000
Sundry Creditors		18,000		Plant and Machinery	26,000
Bills Payable		5,000		Stock	14,000
Realisation Expenses		3,000	26,000	Furniture	3,000	52,000
				Loss transferred to:
				Rahul’s Capital A/c	8,000
				Rohit’s Capital A/c	8,000
				Ramesh’s Capital A/c	4,000	20,000
			98,000			98,000

Partners’ Capital Accounts
Dr.	Cr.
Particulars		Rahul	Rohit	Ramesh	Particulars	Rahul	Rohit	Ramesh
Balance b/d				3,000	Balance b/d	25,000	10,000
Realisation A/c (Loss)		8,000	8,000	4,000	General Reserve	2,400	2,400	1,200
Ramesh’s Capital A/c		2,000	2,000		Bank A/c			1,800
Bank A/c		17,400	2,400		Rahul’s Capital A/c			2,000
					Rohit’s Capital A/c			2,000
		27,400	12,400	7,000		27,400	12,400	7,000

Bank Account
Dr.						Cr.
Particulars		Amount Rs	Particulars		Amount Rs
Balance b/d		8,000	Realisation A/c (Liabilities)		26,000
Realisation A/c (Assets)		52,000	Capital A/cs:
Ramesh’s Capital A/c		1,800	Rahul	17,400
			Rohit	2,400	19,800
			Rahul’s Loan A/c		16,000
		61,800			61,800

Rahul’s Loan Account
Dr.	Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Bank A/c		16,000	Balance b/d	16,000
		16,000		16,000

Working Notes:

Capital Deficiency of Ramesh	Rs
Debit balance of Ramesh	7,000
Less: General Reserve	1,200
	5,800
Less: Cash brought in by Ramesh	1,800
Capital Deficiency	4,000

Capital Deficiency of Rs 4,000 to be distributed between Rahul and Rohit (Solvent Partners) in the ratio 2:2.