X, Y and Z carrying on business as merchants and sharing profits and losses in the ratio of 2 : 2 : 1 ,dissolved their firm as at 31st March, 2018 on which date their Balance Sheet was as follows:

Liabilities

₹

Assets

₹

Sundry Creditors
41,500
Cash at Bank
22,500

Bills Payable 20,000 Stock 80,000

Bank Loan 40,000 Debtors 50,000

General Reserve 50,000 Less: Provision for Doubtful Debts 2,500 47,500

Investments Fluctuation Reserve 40,000 Investments 55,000

Capital A/cs: Premises 1,51,500

X
75,000

Y 75,000

Z 15,000 1,65,000

3,56,500

3,56,500

A bill for ₹ 5,000 received from Mohan discounted from bank is not met on maturity.
The assets except Cash at Bank and Investments were sold to a company which paid ₹ 3,25,000 in cash.The Investments were sold and ₹ 56,500 were received. Mohan proved insolvent and a dividend of 50% was received from his estate . Sundry Creditors (including Bills Payable) were paid ₹ 57,500 in full settlement. Realisation Expenses amounted to ₹ 15,000.
Prepare Realisation Account , Partners' Capital Accounts and Bank Account .

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Solution

Realisation Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Stock

80,000

Creditors

41,500

Debtors

50,000

Bills Payable

20,000

Investment

55,000

Bank Loan

40,000

Premises

1,51,500

Investment Fluctuation Reserve

40,000

Bank A/c :-

Provision for Doubtful Debts

2,500

Bill

5,000

Bank A/c-

Creditors & Bills Payable

57,500

Assets

3,25,000

Expenses

15,000

Investments

56,500

Bank loan

40,000

1,17,500

Bill

2,500

3,84,000

Profit transferred to:

X’s Capital A/c

29,600

Y’s Capital A/c

29,600

Z’s Capital A/c

14,800

74,000

5,28,000

5,28,000

Partners’ Capital Accounts

Dr.

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

Bank A/c

1,24,600

1,24,600

39,800

Balance b/d

75,000

75,000

15,000

(bal. figure)

General Reserve

20,000

20,000

10,000

Realisation A/c

29,600

29,600

14,800

1,24,600

1,24,600

39,800

1,24,600

1,24,600

39,800

Bank Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

22,500

Realisation A/c

1,17,500

Realisation A/c

3,84,000

X’s Capital A/c

1,24,600

Y’s Capital A/c

1,24,600

Z’s Capital A/c

39,800

4,06,500

4,06,500

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Similar questions

Q. Yogesh and Naresh were partners sharing profits equally. They dissolved the firm on 1st April, 2019. Naresh was assigned the responsibility to realise the assets and pay the liabilities at a remuneration of ₹10,000 including expenses. Balance Sheet of the firm as on that date was as follows:

Liabilities		Amount (₹)	Assets		Amount (₹)
Creditors		40,000	Cash/Bank		6,000
Bills Payable		40,000	Investments		30,000
Naresh's Loan		44,000	Debtors	40,000
Mrs. Yogesh's Loan		42,000	Less: Provision for Doubtful Debts	4,000	36,000
Investment Fluctuation Reserve		8,000	Bills Receivable		33,400
Capital A/cs:			Profit and Loss A/c		1,10,600
Yogesh	21,000
Naresh	21,000	42,000

		2,16,000			2,16,000

The firm was dissolved on following terms:
(a) Yogesh was to pay his wife's loan.
(b) Debtors realised ₹ 30,000.
(c) Naresh was to take investments at an agreed value of ₹ 26,000.
(d) Creditors and Bills Payable were payable after two months but were paid immediately at a discount of 15% p.a.
(e) Bills Receivable were received allowing 5% rebate.
(f) A Debtor previously written off as Bad Debt paid ₹ 15,000.
(g) An unrecorded asset realised ₹10,000.
Prepare Realisation Account, Partners' Capital Accounts, Partners' Loan Account and Cash/Bank Account.

PRACTICAL PROBLEMS

X, Y and Z were carrying on business. They share profits and losses in the ratio of 5:3:2 respectively. Their Balance Sheet as on 31^st March, 2010 was as under:

Balance Sheet as on 31^st March, 2010
Liabilities	Amount Rs	Assets		Amount Rs
Sundry Creditors	21,000	Plant and Machinery		20,000
Y’s loan	5,000	Investment		8,000
Reserve fund	20,000	Stock		30,000
Capital Account:		Debtors	18,000
X	20,000	Less: R.D.D.	1,000	17,000
Y	10,000	Cash in hand		2,000
Z	4,000	Cash at Bank		3,000
	80,000			80,000

On the above date the firm was dissolved and the assets realised as under:

1) Investment Rs 5,000, Stock Rs 24,000 and Debtors Rs 15,000.

2) The Plant and Machinery was taken over by Mr. ‘X’ at book value.

3) Sundry Creditors and Mr. ‘Y’ loan were paid in full.

4) Realisation expenses incurred Rs 1,000.

Prepare Realisation Account, Partner’s Capital Account and Bank Account

Q. A, B and C were in partnership sharing profits and losses in the ratio of 2 : 1 : 1. They decided to dissolve the partnership. On that date of dissolution, Sundry Assets (including cash ₹ 5,000) amounted to ₹ 88,000, assets realised ₹ 80,000 (including an unrecorded asset which realised ₹ 4,000). A contingent liability on account of bills discounted ₹ 8,000 was paid by the firm. The Capital Accounts of A, B and C showed a balance of ₹ 20,000 each.
Prepare Realisation Account, Partners' Capital Accounts and Cash Account.

Q. A, B and C were equal partners . On 31st March,2018, their Balance Sheet stood as:



Liabilities		₹	Assets	₹
Creditors		50,400	Cash	3,700
Reserve		12,000	Stock	20,100
Capital A/cs:			Debtors	62,600
A	30,000		Investments	16,000
B	25,000		Furniture	6,500
C	15,000	70,000	Building	23,500
		1,32,400		1,32,400

The firm was dissolved on the above date on the following terms:
(a) For the purpose of dissolution, Investments were valued at ₹ 18,000 and A took over the Investments at this value.
(b) Fixed Assets realised ₹ 29,700 whereas Stock and Debtors realised ₹ 80,000.
(c) Expenses of realisation amounted to ₹ 1,300.
(d) Creditors allowed a discount of ₹ 800.
(e) One Bill receivable for ₹ 1,500 under discount was dishonoured as the acceptor had become insolvent and was unable to pay anything and hence the bill had to be met by the firm .
Prepare Realisation Account , Partner's Capital Accounts and Cash Account showing how the accounts would finally be settled among the partners.

Q. 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 Account:
(a) There was furniture worth ₹ 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 ₹ 15,000 on the date of dissolution.
(c) Harsh's loan of ₹ 6,000 was discharged at ₹ 6,200.
(d) The firm paid realisation expenses amounting to ₹ 5,000 on behalf of Harsh who had to bear these expenses.
(e) There was a bill for 1,200 under discount. The bill was received from Soham who proved insolvent and a first and final dividend of 25% was received from his estate.
(f) Creditors, to whom the firm owed ₹ 6,000, accepted stock of ₹ 5,000 at a discount of 5% and the balance in cash.

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Realisation Account
Dr.							Cr.
Particulars			Amount Rs	Particulars		Amount Rs
Stock			80,000	Creditors		41,500
Debtors			50,000	Bills Payable		20,000
Investment			55,000	Bank Loan		40,000
Premises			1,51,500	Investment Fluctuation Reserve		40,000
Bank A/c :-				Provision for Doubtful Debts		2,500
Bill		5,000		Bank A/c-
Creditors & Bills Payable		57,500		Assets	3,25,000
Expenses		15,000		Investments	56,500
Bank loan		40,000	1,17,500	Bill	2,500	3,84,000
Profit transferred to:
X’s Capital A/c	29,600
Y’s Capital A/c	29,600
Z’s Capital A/c	14,800		74,000

			5,28,000			5,28,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z

Bank A/c	1,24,600	1,24,600	39,800	Balance b/d	75,000	75,000	15,000
(bal. figure)				General Reserve	20,000	20,000	10,000
				Realisation A/c	29,600	29,600	14,800
	1,24,600	1,24,600	39,800		1,24,600	1,24,600	39,800

Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	22,500	Realisation A/c	1,17,500
Realisation A/c	3,84,000	X’s Capital A/c	1,24,600
		Y’s Capital A/c	1,24,600
		Z’s Capital A/c	39,800

	4,06,500		4,06,500