Question

The following is the balance Sheet of Gupta and Sharma as on December 31, 2012

$$\begin{array}{cccccccc}& & & & \text{Balance Sheet of Gupta and Sharma}& & & \\ & & & & \text{as on December 31, 2012}& & & \end{array}$$

$$\begin{array}{ccccc}\text{Capital and Liabilities}& & \text{Amt.}& \text{Assets}& \text{Amt.}\\ \text{Sundry Creditors}& & 38,000& \text{Cash at Bank}& 12,500\\ \text{Mrs. Gupta's Loan}& & 20,000& \text{Sundry Debtors}& 55,000\\ \text{Mrs. Sharma's Loan}& & 30,000& \text{Stock}& 44,000\\ \text{Reserve Fund}& & 6,000& \text{Bills Receivable}& 19,000\\ \text{Provision of Doubtful Debts}& & 4,000& \text{Machinery}& 52,000\\ \text{Capital}& & & \text{Investment}& 38,500\\ \text{Gupta}& 90,000& & \text{Fixtures}& 27,000\\ \text{Sharma}& \underset{–}{60,000}& \underset{–}{1,50,000}& & \underset{–}{}\\ & & 2,48,000& & 2,48,000\\ & & \underset{–}{}& & \underset{–}{}\end{array}$$

The firm was dissolved on December 31 2012 and Asset realised and setlements of Liabilities as follows:
(a) The realisation of the assets were as follows
$$\begin{array}{cc}\text{Sundry Debtors}& 52,000\\ \text{Stock}& 42,000\\ \text{Bills Receivable}& 16,000\\ \text{Machinery}& 49,000\end{array}$$
(b) Investment was taken over by Gupta at agreed value of 36,000 and agreed to pay of Mrs Gupta's loan.

(c) The Sundry Creditors were paid fo less % discount.

(d) The realisation expenses incurred amounted to Rs. 1,200.

Journalise the entries to be made on the dissolution and prepare realisation account, bank account and partners capital accounts.

Answer 1

Journal Entries
$$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ 2006& & & & & \\ \text{Dec 31}& \text{Realisation A/c}& \text{Dr.}& & 2,35,500& \\ & \text{To Sundry Debtors A/c}& & & & 55,000\\ & \text{To Stock A/c}& & & & 44,000\\ & \text{To Bills Receivable A/c}& & & & 19,000\\ & \text{To Machinery A/c}& & & & 52,000\\ & \text{To Investment A/c}& & & & 38,500\\ & \text{To Fixtures A/c}& & & & 27,000\\ & \text{(Assets transferred to realisation account)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 31}& \text{Sundry Creditors A/c}& \text{Dr.}& & 38,000& \\ & \text{Mrs. Gupta's Loan A/c}& \text{Dr.}& & 20,000& \\ & \text{Mrs. Sharma's Loan A/c}& \text{Dr.}& & 30,000& \\ & \text{Provision for Doubtful Debts A/c}& \text{Dr.}& & 4,000& \\ & \text{To Realisation A/c}& & & & 92,000\\ & \text{(Liabilities transferred to realisation account)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 31}& \text{Bank A/c}& \text{Dr.}& & 1,59,000& \\ & \text{To Realisation A/c}& & & & 1,59,000\\ & \text{(Assets realised: Sundry debtors Rs. 52,000,}& & & & \\ & \text{stock Rs. 42,000, bills receivable Rs. 16,000 and}& & & & \\ & \text{machinery, Rs. 49,000)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 31}& \text{Realisation A/c}& \text{Dr.}& & 20,000& \\ & \text{To Gupta's Capital A/c}& & & & 20,000\\ & \text{(Gupta took over Mrs. Gupta's loan)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 31}& \text{Gupta's Capital A/c}& \text{Dr.}& & 36,000& \\ & \text{To Realisation A/c}& & & & 36,000\\ & \text{(Investment taken over by Gupta)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 31}& \text{Realisation A/c}& \text{Dr.}& & 66,860& \\ & \text{To Bank A/c}& & & & 66,860\\ & \text{(Liabilities paid: Mrs. Sharma's loan Rs. 30,000}& & & & \\ & \text{and creditors Rs. 38,000 paid off less 3 \% discount)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 31}& \text{Realisation A/c}& \text{Dr.}& & 1,200& \\ & \text{To Bank A/c}& & & & 1,200\\ & \text{(Realisation expenses paid)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 31}& \text{Gupta’s Capital A/c}& \text{Dr.}& & 18,280& \\ & \text{Sharma’s Capital A/c}& \text{Dr.}& & 18,280& \\ & \text{To Realisation A/c}& & & & 36,560\\ & \text{(Loss on realisation transferred to Partners’ capital Account)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 31}& \text{Reserve Fund A/c}& \text{Dr.}& & 6,000& \\ & \text{To Gupta’s Capital A/c}& & & & 3,000\\ & \text{To Sharma’s Capital A/c}& & & & 3,000\\ & \text{(Reserve fund distributed among partners ratio)}& & & & \\ & \underset{–}{}& & & & \\ \text{Dec 31}& \text{Gupta’s Capital A/c}& \text{Dr.}& & 58,720& \\ & \text{Sharma’s Capital A/c}& \text{Dr.}& & 44,720& \\ & \text{To Bank A/c}& & & & 1,03,440\\ & \text{(Final payment made to partners)}& & & & \end{array}$$

$$\begin{array}{cccccccc}\text{Dr.}& & & & \text{Realisation Account}& & & \text{Cr.}\end{array}$$
$$\begin{array}{cccccc}\text{Particulars}& & \text{Amt.}& \text{Particulars}& & \text{Amt.}\\ \text{Sundry Debtors}& & 55,000& \text{Sundry Creditors}& & 38,000\\ \text{Stock}& & 44,000& \text{Mrs. Gupta's Loan}& & 20,000\\ \text{Bills Receivable}& & 19,000& \text{Mrs. Sharma's Loan}& & 30,000\\ \text{Machinery}& & 52,000& \text{Provision for Doubtful Debts}& & 4,000\\ \text{Investment}& & 38,500& \text{Bank:}& & \\ & & & \text{Sundry Debtors}& 52,000& \\ \text{Fixtures}& & 27,000& \text{Stock}& 42,000& \\ \text{Gupta's Capital A/c (Mrs. Gupta's Loan)}& & 20,000& \text{Bills Receivable}& 16,000& \\ \text{Bank A/c}& & & \text{Machinery}& \underset{–}{49,000}& 1,07,000\\ \text{Creditors}& 36,860& & \text{Gupta's Capital A/c (Investment)}& & 36,000\\ \text{Mrs. Sharma's Loan}& 30,000& & \text{Loss Transferred to}& & \\ \text{Expenses}& \underset{–}{1,200}& 68,060& \text{Gupta's Capital A/c}& 18,280& \\ & & & \text{Sharma Capital A/c}& \underset{–}{18,280}& 36,560\\ & & \underset{–}{}& & \underset{–}{}& \\ & & 3,23,560& & 3,23,560& \\ & & \underset{–}{}& & \underset{–}{}& \end{array}$$

$$\begin{array}{cccccccc}\text{Dr.}& & & & \text{Partners' Capital Account}& & & \text{Cr.}\end{array}$$

$$\begin{array}{cccccc}\text{Particulars}& \text{Gupta}& \text{Sharma}& \text{Particulars}& \text{Gupta}& \text{Sharma}\\ \text{Realisation (Investment)}& 36,000& & \text{Balance b/d}& 90,000& 60,000\\ \text{Realisation (Loss)}& 18,280& 18,280& \text{Realisation (Mr. Gupta Loan)}& 20,000& \\ \text{Bank (Balancing Figure)}& \underset{–}{58,720}& \underset{–}{44,720}& \text{Reserve Fund}& \underset{–}{3,000}& \underset{–}{3,000}\\ & \underset{–}{1,13,000}& \underset{–}{63,000}& & \underset{–}{1,13,000}& \underset{–}{63,000}\end{array}$$

$$\begin{array}{cccccccc}\text{Dr.}& & & & \text{Bank Account}& & & \text{Cr.}\end{array}$$
$$\begin{array}{cccc}\text{Particulars}& \text{Amt.}& \text{Particulars}& \text{Amt.}\\ \text{Balance b/d}& 12,500& \text{Realisation (Payment of expenses and liabilities)}& 68,060\\ \text{Realisation (Assets Realised)}& 1,59,000& \text{Gupta's Capital A/c}& 58,720\\ & & \text{Sharma's Capital A/c}& 44,720\\ & \underset{–}{}& & \underset{–}{}\\ & 1,71,500& & 1,71,500\end{array}$$

Note:
In chapter of dissolution, liabilities are to be paid off in realisation even if no information is given by assets are realised only if the information is provided in question. In above solution fixture willl not be realised at any value as no information is provided.