What Journal entries would be passed for following unrecorded liabilities on the dissolution of a firm partners A and B:
(a) There was a contingent liability in respect of bills discounted but not matured of Rs. 18,500. An acceptor of one bill of Rs. 2,500 became insolvent and fifty paise in a rupee was recovered. The liability of the firm on accout of this bill discounted and dishonoured has not so far been recorded.
(b) There was a contingent liability in respect of claim for damages for Rs. 75,000, such liability was settled for Rs. 50,000, and paid by the partner A.
(c) Firm will have to pay Rs. 10,000 as compensation to an injured employee, which was a contingent liability not accepted by firm.
(d) Rs. 5,000 for damages claimed by a customer has been disputed by the firm. It was settled at 70% by a compromise between the custorner and the firm.

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Solution

(a) (i) Realisation A/C.... Dr. 2500
To Bank A/C 2500
(Being settlement of unrecorded liability)
(ii) Bank A/C...... Dr. 1250
To Realisation A/C 1250
(Being realisation of an unrecorded asset at 50 paisa per rupee)

(b) Realisation A/C.... Dr. 50000
To A's Capital A/C 50000
(Being liability discharged off by A)

(c) Realisation A/C...... Dr. 10000
To Bank A/C 10000
(Being settlement of an unrecorded liability)

(d) Realisation A/C....... Dr. 3500
To Bank A/C 3500
(Being settlement of damages claimed by customer at 70% of the total amount)

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Q. What Journal entries would be passed for discharge of following unrecorded liabilities on the dissolution of a firm of partners A and B:
(a) There was a contingent liability in respect of bills discounted but not matured of ₹ 18,500. An acceptor of one bill of ₹ 2,500 became insolvent and fifty paise in a rupee was recovered. The liability of the firm on account of this bill discounted and dishonoured has not so far been recorded.
(b) There was a contingent liability in respect of a claim for damages for ₹ 75,000, such liability was settled for ₹ 50,000 and paid by the partner A.
(c) Firm will have to pay ₹ 10,000 as compensation to an injured employee, which was a contingent liability not accepted by the firm.
(d) ₹ 5,000 for damages claimed by a customer has been disputed by the firm. It was settled at 70% by a compromise between the customer and the firm.

P and Q were partners in a firm. Pass journal entries for the following transactions on dissolution of the firm after various assets and external liabilities have been transferred to Realisation A/c :

(i) X, an unrecorded creditor of Rs. 10,000 was paid by partner P at a discount of 20%.

(ii) Y, an unrecorded creditor of Rs. 25,000, took over Computer at Rs. 30,000. Balance was paid by him in cash.

(iii) Computer of Rs. 25,000 and a Vehicle of Rs. 10,000 were appearing in the Balance Sheet but no other additional information was given regarding these items.

(iv) A creditor to whom Rs. 10,000 were to be paid accepted an unrecorded asset of Rs. 15,000 in full settlement of his claim.

(v) An unrecorded asset of Rs. 35,000 was given to an unrecorded creditor of Rs. 50,000 in settlement of his claim of Rs. 30,000 and the balance was paid to him in cash.

(vi) P's loan was appearing on the liabilities side of the Balance Sheet at Rs. 50,000. He accepted an unrecorded asset of Rs. 40,000 at Rs. 35,000 and the balance was paid to him in Cash.

Aman and Harsh were partners in a firm. They decided to dissolve their firm. Pass necessary journal entries for the following after various assets (other than Cash and Bank) and third party liabilities have been transferred to Realisation A/c.

(a) There was furniture worth Rs. 50,000. Aman took over 50% of the furniture at 10% discount and the remaining furniture was sold at 30% profit on book value.

(b) Profit and Loss Account was showing a credit balance of Rs. 15,000 which was distributed between the partners.

(d) The firm paid realization expenses amounting to Rs. 5,000 on behalf of Harsh who had to bear these expenses.

(e) There was a bill for Rs. 1,200 under discount. The bill was received from Soham who proved insolvent and a first and final dividend of 25% of bill amount was received from his estate.

(f) Creditors, to whom the firm owed Rs. 6,000, accepted stock of Rs. 5,000 at a discount of 5% and the balance in cash.

(g) The loss on dissolution was Rs. 8,000.

What journal entries would be recorded for the following transactions on the dissolution of a firm after various assets (Other than cash) on the third party liabilities have been transferred to realisation account ?

1. Arti took over the Stock worth Rs. 80,000 at Rs. 68,000.

2. There was unrecorded Bike of Rs. 40,000, which was taken over by Mr. Karim.

3. The firm paid Rs. 40,000 as compensation to employees.

4. Sundry creditors amounting to Rs. 36,000 were settled at a discount of 15 $%$ .

5. Loss on realisation Rs. 42,000 was to be distributed between Arti and Karim in the ratio of 3 : 4.

Srijan, Raman and Manan were partners in a firm sharing profits and losses in the ratio of 2:2:1. On 31st March, 2017 their Balance Sheet was as follows:

BALANCE SHEET OF SRIJAN, RAMAN AND MANAN
as on 31-03-2017
$\begin{matrix} Liabilities & Amount & Assets & Amount (R s) & (R s) Capitals : & Capital : Srijan 2, 00, 000 & Manan & 10, 000 Raman 1, 50, 000 - -------- - & 3, 50, 000 & Plant & 2, 20, 000 Creditors & 75, 000 & Investments & 70, 000 Bills payable & 40, 000 & Stock & 50, 000 Outstanding Salary & 35, 000 & Debtors & 60, 000 Bank & 10, 000 Profit and Loss & 80, 000 Total & 5, 00, 000 & Total & 5, 00, 000 \end{matrix}$

On the above date they decided to dissolve the firm:

(i) Srijan was appointed to realise the assets and discharge the liabilities. Srijan was to receive 5% commission on sale of assets (except cash) and was to bear all expenses of realisation.

(ii) Assets were realised as follows : Plant Rs 85,000; Stock Rs 33,000; Debtors Rs 47,000.

(iii) Investments were realised at 95% of the book value.

(iv) The firm had to pay Rs 7,500 for an outstanding repair bill not provided for earlier.

(v) A contingent liability in respect of bills receivable, discounted with the bank has also materialised and had to be discharged for Rs 15,000.

(vi) Expenses of realisation amounting to Rs 3,000 were paid by Srijan.

Prepare Realisation Account, Partner's Capital Accounts and Bank Account.

Moli, Bhola and Raj were partners in a firm sharing profits and losses in the ratio of 3:3:4. Their partnership deed provided for the following:

(i) Interest on capital @ 5% p.a.

(ii) Interest on drawing @12% p.a.

(iii) Interest on partner's loan @6% p.a.

Moli was allowed an annual salar of Rs 4,000. Bhola was allowed a commission of 10% of net profit as shown by Profit and Loss Account and Raj was guaranteed a profit of Rs 1,50,000 after making all the adjustments as provided in the partnership agreement.

Their fixed capital were Moli - Rs 5,00,000; Bhola : Rs 8,00,000 and Raj Rs 4,00,000. On 1st April, 2016 Bhola extended a loan of Rs 1,00,000 to the firm. The net profit of the firm for the year ended 31st March , 2017 before interest on Bhola's loan was Rs 3,06,000. Prepare Profit and Loss Appropriation Account of Moli, Bhola and Raj for the year ended 31st March 2017, assuming that Bhola withdrew Rs 5,000 at the end of the end of each month, Moli withdrew Rs 10,000 at the end of each quarter and Raj withdrew Rs 40,000 at the end of each half year.

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