Question

Rita and Sobha are partners in a firm, Fancy Garments Exports, sharing profits and losses equally. On 1st April, 2019, the Balance Sheet of the firm was:

Liabilities				Amount (₹)	Assets			Amount (₹)
Sundry Creditors				75,000	Cash			6,000
Bills Payable				30,000	Bank			30,000
Rita's Loan				15,000	Stock			75,000
Reserve				24,000	Book Debts		66,000
Capital A/cs:					Less: Provision for Doubtful Debts		6,000	60,000
Rita		90,000
Sobha		30,000		1,20,000	Plant and Machinery			45,000
					Land and Building			48,000
				2,64,000				2,64,000

The firm was dissolved on the date given above. The following transactions took place:
(a) Rita took 25% of the Stock at a discount of 20% in settlement of her loan.
(b) Book Debts realised ₹ 54,000; balance of the Stock was sold at a profit of 30% on cost.
(c) Sundry Creditors were paid out at a discount of 10%. Bills Payable were paid in full .
(d) Plant and Machinery realised ₹ 75,000. Land and Building ₹ 1,20,000.
(e) Rita took the goodwill of the firm at a value of ₹ 30,000.
(f) An unrecorded asset of ₹ 6,900 was handed over to an unrecorded liability of ₹ 6,000 in full settlement.
(g) Realisation expenses were ₹ 5,250.
Show Realisation Account, Partners' Capital Accounts and Bank Account in the books of the firm.

Answer 1

Realisation Account
Dr.						Cr.
Particulars			Amount (₹)	Particulars		Amount (₹)
Stock			75,000	Provision for Doubtful Debts		6,000
Book Debts			66,000	Sundry Creditors		75,000
Plant and Machinery			45,000	Bills Payable		30,000
Land and building			48,000
				Rita’s Capital A/c		30,000
				(Goodwill taken over)
Bank A/c:				Rita’s Loan A/c (Stock taken over)		15,000
Sundry Creditors		67,500
Bills Payable		30,000		Bank A/c:
Expenses		5,250	1,02,750	Book Debts	54,000
Profit transferred to:				Stock	73,125
Rita’s Capital A/c		70,688		Plant and Machinery	75,000
Sobha’s Capital A/c		70,687	1,41,375	Land and Building	1,20,000	3,22,125
			4,78,125			4,78,125

Partners’ Capital Accounts
Dr.							Cr.
Particulars		Rita (₹)	Sobha (₹)	Particulars	Rita (₹)	Sobha (₹)
Realisation A/c (Assets)		30,000	–	Balance b/d	90,000	30,000
				Reserve Fund	12,000	12,000
Bank A/c		1,42,688	1,12,687	Realisation A/c (Profit)	70,688	70,687
		1,72,688	1,12,687		1,72,688	1,12,687

Rita’s Loan A/c
Dr.		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Realisation A/c	15,000	Balance b/d	15,000
	15,000		15,000

Bank Account
Dr.					Cr.
Particulars		Amount (₹)	Particulars	Amount (₹)
Balance b/d		30,000	Realisation A/c	1,02,750
Cash A/c		6,000	Rita’s Capital A/c	1,42,688
Realisation A/c		3,22,125	Sobha’s Capital A/c	1,12,687
		3,58,125		3,58,125

Working Notes:

WN1: Value of Stock Taken Over by Rita

$$\begin{gathered} \mathrm{Stock}\mathrm{taken}\mathrm{over}\mathrm{by}\mathrm{Rita}=\left(\mathrm{Book}\mathrm{Value}\mathrm{of}\mathrm{Stock}\times \frac{25}{100}\times \frac{80}{100}\right)[\mathrm{Since}\mathrm{stock}\mathrm{is}\mathrm{taken}\mathrm{over}\mathrm{at}\mathrm{a}\mathrm{discount}\mathrm{of}20\%] \\ \mathrm{Stock}\mathrm{taken}\mathrm{over}\mathrm{by}\mathrm{Rita}=₹\left(75,000\times \frac{25}{100}\times \frac{80}{100}\right)=₹15,000 \end{gathered}$$

WN2: Value of Stock Sold

​$$\begin{gathered} \mathrm{Book}\mathrm{Value}\mathrm{of}\mathrm{Balance}\mathrm{of}\mathrm{Stock}\mathrm{Sold}=\mathrm{Value}\mathrm{of}\mathrm{Stock}-\mathrm{Stock}\mathrm{Taken}\mathrm{over}\mathrm{by}\mathrm{Rita} \\ \mathrm{Book}\mathrm{Value}\mathrm{of}\mathrm{Balance}\mathrm{of}\mathrm{Stock}\mathrm{Sold}=₹(75,000-18,750)=₹56,250 \\ \mathrm{Value}\mathrm{of}\mathrm{Stock}\mathrm{Sold}=₹\left(56,250\times \frac{130}{100}\right)=₹73,125[\mathrm{Sold}\mathrm{at}30\%\mathrm{Profit}] \end{gathered}$$