Question

Salman and Amir were partners in a firm sharing profit in the ratio of 2 : 3. On 31st March, 2011, their Balance Sheet was as follows:
BALANCE SHEET
as on 31st March, 2011
$\begin{array}{ccccc}\text{Liabilities}& & \text{Amount}& \text{Assets}& \text{Amount}\\ & & \text{(Rs)}& & \text{(Rs)}\\ \text{Capitals:}& & & \text{Land and Building}& 3,00,000\\ \text{Salman}& 2,00,000& & \text{Stock}& 1,00,000\\ \text{Amir}& \underset{–}{3,00,000}& 5,00,000& \text{Debtors}& 1,50,000\\ \text{Creditors}& & 1,05,000& \text{Bank}& 1,55,000\\ \text{Workmen Compensation Fund}& & 1,00,000& & \\ & & \overline{7,05,000}& & \overline{7,05,000}\end{array}$

The firm was dissolved on 1-4-2011 and the Assets and Liabilities were settled as follows:

(i) Salman agreed to take over Land and Building at Rs 3,50,000 by paying cash.

(ii) Stock was sold for Rs 90,000.

(iii) Creditors accepted debtors in full settlement of their claim.

Pass necessary Journal entries for dissolution of the firm.

Answer 1

JOURNAL
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Debit}& \text{Credit}\\ & & & & \text{(Rs)}& \text{(Rs)}\\ 2011& & & & & \\ \text{April}& \text{Realisation A/c}& \text{Dr.}& & 5,50,000& \\ & \text{To Land and Building A/c}& & & & 3,00,000\\ & \text{To Stock}A/c& & & & 1,00,000\\ & \text{To Debtors}& & & & 1,50,000\\ & \underset{–}{\text{(Being assets transferred to Realisation Account)}}& & & & \\ & \text{Creditors A/c}& \text{Dr.}& & 1,05,000& \\ & \text{To Realisation A/c}& & & & 1,05,000\\ & \underset{–}{\text{(Being creditors transferred to Realisation Acount)}}& & & & \\ & \text{Bank A/c}& \text{Dr.}& & 3,50,000& \\ & \text{To Realisation A/c}& & & & 3,50,000\\ & \underset{–}{\text{(Being land and building sold to Salman for cash)}}& & & & \\ & \text{Bank A/c}& \text{Dr.}& & 90,000& \\ & \text{To Realisation A/c}& & & & 90,000\\ & \underset{–}{\text{(Being stock sold for Rs. 90,000)}}& & & & \\ & \text{Salman's Capital A/c}& \text{Dr.}& & 2,000& \\ & \text{Amir's Capital A/c}& \text{Dr.}& & 3,000& \\ & \text{To Realisation A/c}& & & & 5,000\\ & \text{(Being loss on realisation transferred to Partner's Capital}& & & & \\ & \underset{–}{{\text{Accounts)}}^{\ast }1}& & & & \\ & \text{Workmen Compensation Fund A/c}& \text{Dr.}& & 1,00,000& \\ & \text{To Salman's Capital A/c}& & & & 40,000\\ & \text{To Amir's Capital A/c}& & & & 60,000\\ & \text{(Being workmen compensation fund distributed}& & & & \\ & \underset{–}{\text{between the partners)}}& & & & \\ & \text{Salman's Capital A/c}& \text{Dr.}& & 2,38,000& \\ & \text{Amir's Capital A/c}& \text{Dr.}& & 3,57,000& \\ & \text{To Bank A/c}& & & & 5,95,000\\ & {\text{(Being final payment made)}}^{\ast 2}& & & & \end{array}$

Working Notes :

*1

$\text{Dr.}\text{REALISATION ACCOUNT}\text{Cr.}\begin{array}{cccccc}\text{Particulars}& & \text{Amount}& \text{Particulars}& & \text{Amount}\\ & & \text{(Rs.)}& & & \text{(Rs.)}\\ \text{To Sundry Assets :}& & & \text{By Creditors}& & 1,05,000\\ \text{Land and Building A/c}& \text{3,00,000}& & \text{By Bank A/c:}& & \\ \text{Stock A/c}& \text{1,00,000}& & \text{Land and Building}& 3,50,000& \\ \text{Debtors A/c}& \underset{–}{\text{1,50,000}}& 5,50,000& \text{Stock}& \underset{–}{90,000}& \text{4,40,000}\\ & & & \text{By Loss transferred to:}& & \\ & & & \text{Salman's Capital A/c}& \text{2,000}& \\ & & & \text{Amir's Capital A/c}& \underset{–}{\text{3,000}}& \underset{–}{5,000}\\ & & \overline{5,50,000}& & & 5,50,000\end{array}$

*2

$\text{Dr.}\text{PARTNER'S CAPITAL ACCOUNTS}\text{Cr.}\begin{array}{cccccc}\text{Particulars}& \text{Salman}& \text{Amir}& \text{Particulars}& \text{Salman}& \text{Amir}\\ & \text{(Rs.)}& \text{(Rs.)}& & & \text{(Rs.)}\\ \text{To Realisation A/c (Loss)}& \text{2,000}& 3,000& \text{By Balance b/d}& 2,00,000& 3,00,000\\ \text{To Bank A/c(Final Payment)}& \text{2,38,000}& \text{3,57,000}& \text{By Workmen}& & \\ & & & \text{Compensation Fund}& 40,000& 60,000\\ & 2,40,000& 3,60,000& & 2,40,000& 3,60,000\end{array}$