Question

Verma and Sharma were partners sharing profits in the ratio of 3 : 1 on 31-3-2011. Their Balance Sheet was as follows:

BALANCE SHEET OF VERMA AND SHARMA

as on 31-3-2011
$\begin{array}{cccc}\text{Liabilities}& \text{Amount}& \text{Assets}& \text{Amount}\\ & \text{(Rs)}& & \text{(Rs)}\\ \text{Capital :}& & \text{Land and Building}& 70,000\\ \text{Verma}1,20,000& & \text{Machinery}& 60,000\\ \text{Sharma}80,000& 2,00,000& \text{Debotrs}& 80,000\\ \text{Creditors}& 70,000& \text{Bank}& 60,000\\ & \overline{2,70,000}& & \overline{2,70,000}\end{array}$

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

(i) Creditors of Rs 50,000 took over land and building in full settlement of their claim.

(ii) Remaining creditors were paid in cash.

(iii) Machinery was sold at a depreciation of $30\%$

(iv) Debtors were collected at a cost of Rs 500.

(v) Expenses of realisation were Rs 1,700. Pass necessary Journal Entries for the dissolution of the firm.

Answer 1

JOURNAL OF VERMA AND SHARMA
$\begin{array}{cccccc}\text{Date}& \text{particulars}& & \text{L.F.}& \text{Debit}& \text{Credit}\\ & & & & \text{(Rs)}& \text{(Rs)}\\ 2011& \text{Realisation A/c}& \text{Dr.}& & 2,10,000& \\ & \text{To Land and Building A/c}& & & & 70,000\\ & \text{To Machinery A/c}& & & & 60,000\\ & \text{To Debtors A/c}& & & & 80,000\\ & \underset{–}{\text{(Being assets transferred to Realisation A/c)}}& & & & \\ & \text{Creditors A/c}& \text{Dr.}& & 70,000& \\ & \text{To Realisation A/c}& & & & 70,000\\ & \underset{–}{\text{(Being creditors transferred to Realisation A/c)}}& & & & \\ & {\text{Bank A/c}}^{\ast 1}& \text{Dr.}& & 1,21,500& \\ & \text{To Realisation A/c}& & & & 1,21,500\\ & \text{(Being the assets realised : Machinery at Rs 42,000 and}& & & & \\ & \underset{–}{\text{Debtors at Rs 79,500)}}& & & & \\ & \text{Realisation A/c}& \text{Dr.}& & 20,000& \\ & \text{To Bank A/c}& & & & 20,000\\ & \underset{–}{\text{(Being remaining creditors paid off)}}& & & & \\ & \text{Realisation A/c}& \text{Dr.}& & 1,700& \\ & \text{To Bank A/c}& & & & 1,700\\ & \underset{–}{\text{(Being the payment of Realisation Expenses)}}& & & & \\ & \text{Verma's Capital A/c}& \text{Dr.}& & 30,150& \\ & \text{Sharma's Capital A/c}& \text{Dr.}& & 10,050& \\ & \text{To Bank A/c}& & & & 40,200\\ & \text{(Being the loss on realisation transferred to Partner's}& & & & \\ & \underset{–}{\text{capital A/c)}}& & & & \\ & \text{Verma's Capital A/c}& \text{Dr.}& & 89,850& \\ & \text{Sharma's Capital A/c}& \text{Dr.}& & 69,950& \\ & {\text{To Bank A/c}}^{\ast 2}& & & & 1,59,800\\ & \text{(Being the final payment made)}& & & & \end{array}$

Working Notes :

Dr. REALISATION ACCOUNT Cr.
$\begin{array}{cccc}\text{Particulars}& \text{Amount}& \text{Particulars}& \text{Amount}\\ & \text{(Rs)}& & \text{(Rs)}\\ \text{To Land and Building A/c}& 70,000& \text{By Creditors A/c}& 70,000\\ \text{Machinery A/c}& 60,000& \text{By Bank A/c:}& \\ \text{To Debtors A/c}& 80,000& \text{Machinery}42,000& \\ \text{To Bank A/c:}& & \text{Debtors}\underset{–}{79,500}& 1,21,500\\ \text{Creditors}20,000& & \text{By Loss transferred to :}& \\ \text{Expenses}\underset{–}{1,700}& 21,700& \text{Verma's Capital A/c}30,150& \\ & & \text{Sharma's Capital A/c}\underset{–}{10,050}& \underset{–}{40,200}\\ & \overline{2,31,700}& & 2,31,700\end{array}$

Dr. PARTNER'S CAPITAL ACCOUNT Cr.
$\begin{array}{cccccc}\text{Particulars}& \text{Verma}& \text{Sharma}& \text{Particulars}& \text{Verma}& \text{Sharma}\\ & \text{(Rs)}& \text{(Rs)}& & \text{(Rs)}& \text{(Rs)}\\ \text{To Realisation A/c (Loss)}& 30,150& 10,050& \text{By Balance b/d}& 1,20,000& 80,000\\ \text{To Bank A/c (Bal. fig.)}& 89,850& 69,950& & & \\ \text{Finaly Payment}& & & & & \\ & \overline{1,20,000}& \overline{80,000}& & \overline{1,20,000}& \overline{80,000}\end{array}$

Dr. BANK ACCOUNT Cr.
$\begin{array}{cccc}\text{Particulars}& \text{Amount}& \text{Particulars}& \text{Amount}\\ & \text{(Rs)}& & \text{(Rs)}\\ \text{To Balance b/d}& 60,000& \text{By Realisation A/c}& \\ \text{To Machinery A/c}& 42,000& \text{Creditors}20,000& \\ \text{To Debtors A/c}& 79,500& \text{Expenses}\underset{–}{1,700}& 21,700\\ & & \text{By Balance c/d}& \\ & & \text{Verma's Capital A/c}89,850& \\ & & \text{Sharma's Capital A/c}\underset{–}{69,950}& \underset{–}{1,59,800}\\ & \overline{1,81,500}& & \overline{1,81,500}\end{array}$