Question

Rita, Geeta and Ashish were partners in a firm sharing profits/ losses in the ratio 3 : 2 : 1. On March 31, 2012 their balance sheet was as follows.

$$\begin{array}{cccccc}\text{Capital and Liabilities}& & \text{Amt.}& \text{Assets}& & \text{Amt.}\\ \text{Capitals:}& & & \text{Cash}& & 22,500\\ \text{Rita}& 80,000& & \text{Debtors}& & 52,300\\ \text{Geeta}& 50,000& & \text{Stock}& & 36,000\\ \text{Ashish}& \underset{–}{30,000}& 1,60,000& \text{Investments}& & 69,000\\ \text{Creditors}& & 65,000& \text{Plant}& & 91,200\\ \text{Bills Payable}& & 26,000& & & \\ \text{General Reserve}& & 20,000& & & \\ & & \underset{–}{}& & & \underset{–}{}\\ & & \underset{–}{2,71,000}& & & \underset{–}{2,71,000}\end{array}$$

On the above mentioned date the firm was dissolved.

1. Rita was appointed to realise the assets. Rita was to receive 5% commission on the rate of assets (except cash) and was to bear all expenses of realisation.

2. Assets were realised as follows:
Debtors Rs. 30,000
Stock Rs. 26,000
Plant Rs. 42,750

3. Investments were realised at 85% of the book value.

4. Expenses of realisation amounted to Rs. 4,100 .

5. Firm had to pay Rs. 7,200 for outstanding salary not provided for earlier.

6. Contingent liability in respect of bills discounted with the bank was also materialised and paid off Rs. 9,800.

Prepare realisation account, capital accounts of partners and cash account.

Answer 1

Dr. Realisation Account Cr
$$\begin{array}{cccccc}\text{Particulars}& & \text{Amt.}& \text{Particulars}& & \text{Amt.}\\ \text{Debtors}& & 52,300& \text{Creditors}& & 65,000\\ \text{Stock}& & 36,000& \text{Bills Payable}& & 26,000\\ \text{Investment}& & 69,000& \text{Cash:}& & \\ \text{Plant}& & 91,200& \text{Debtors}& 30,000& \\ \text{Cash}& & & \text{Stock}& 26,000& \\ \text{Outstanding Salaries}& 7,200& & \text{Plant}& 42,750& \\ \text{Discounted Bill}& 9,800& & \text{Investment}& \underset{–}{58,650}& 1,57,400\\ \text{Creditors}& 65,000& & \text{Loss Transferred to}& & \\ \text{Bills Payable}& \underset{–}{26,000}& 1,08,000& \text{Rita's Capital A/c}& 57,985& \\ \text{Rita's Capital A/c}& & 7,870& \text{Geeta's Capital A/c}& 38,657& \\ \text{(Commission)}1,57,400\times \frac{5}{100}& & & \text{Ashish Capital A/c}& \underset{–}{19,328}& 1,15,970\\ & & \underset{–}{}& & & \underset{–}{}\\ & & 3,64,370& & & 3,64,370\\ & & \underset{–}{}& & & \underset{–}{}\end{array}$$
Dr. Partners' Capital Account Cr
$$\begin{array}{cccccccc}\text{Particulars}& \text{Rita}& \text{Geeta}& \text{Ashish}& \text{Particulars}& \text{Rita}& \text{Geeta}& \text{Ashish}\\ \text{Realisation (Loss)}& 57,985& 38,657& 19,328& \text{Balanced b/d}& 80,000& 50,000& 30,000\\ \text{Bank (Balancing Figure)}& 39,885& 18,010& 14,005& \text{General Reserve}& 10,000& 6,667& 3,333\\ & & & & \text{Realisation (Commission)}& 7,870& & \\ & \underset{–}{}& \underset{–}{}& \underset{–}{}& & \underset{–}{}& \underset{–}{}& \underset{–}{}\\ & 97,870& 56,667& 33,333& & 97,870& 56,667& 33,333\\ & \underset{–}{}& \underset{–}{}& \underset{–}{}& & \underset{–}{}& \underset{–}{}& \underset{–}{}\end{array}$$
Dr. Cash Account Cr.
$$\begin{array}{cccc}\text{Particulars}& \text{Amt.}& \text{Particulars}& \text{Amt.}\\ \text{Balance b/d}& 22,500& \text{Realisation A/c}& 1,08,000\\ \text{Realisation A/c}& 1,57,400& \text{Rita's Capital A/c}& 39,885\\ & & \text{Geeta's Capital A/c}& 18,010\\ & & \text{Ashish's Capital A/c}& 14,005\\ & \underset{–}{}& & \underset{–}{}\\ & 1,79,900& & 1,79,900\\ & \underset{–}{}& & \underset{–}{}\end{array}$$

Note:
No treatment will be done for expenses on realisation Rs. 4,100 as the firm has already paid 5% of assets realised as commission for dissolution to Rita. Rs. 4,100 actual expense will be paid by Rita personally.