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Question

X, Y and Z entered into partnership on 1st April, 2016. They contributed capital ₹ 40,000, ₹ 30,000 and ₹ 20,000 respectively and agreed to share profits in the ratio of 3 : 2 : 1. Interest on capital was to be allowed @ 15% p.a. and interest on drawings was to be charged at an average rate of 5%. During the two years ended 31st March, 2018, the firm made profit of ₹ 21,600 and ₹ 25,140 respectively before allowing or charging interest on capital and drawings. The drawings of each partner were ₹ 6,000 per year.
On 31st March, 2018, the partners decided to dissolve the partnership due to difference of opinion. On that date, the creditors amounted to ₹ 20,000. The assets, other than cash ₹ 2,000, realised ₹ 1,21,000. Expenses of dissolution amounted to ₹ 760.
Draw up necessary Ledger Accounts to close the books of the firm.

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Solution

Profit and Loss Appropriation
for the year ended March 31, 2017
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
Interest on Capital A/c:
Profit and Loss A/c
21,600
X (40,000 × 15%)
6,000
Interest on Drawings
Y (30,000 × 15%)
4,500
X (6,000 × 5%)
300
Z (20,000 × 15%)
3,000
13,500
Y (6,000 × 5%)
300
Z (6,000 × 5%)
300
900
Profit transferred to:
X’s Capital A/c
4,500
Y’s Capital A/c
3,000
Z’s Capital A/c
1,500
9,000
22,500
22,500
Partners’ Capital Accounts
for the year 2016-17
Dr.
Cr.
Particulars
X
Y
Z
Particulars
X
Y
Z
Drawings A/c
6,000
6,000
6,000
Cash A/c
40,000
30,000
20,000
Interest on Drawings
300
300
300
Interest on Capital A/c
6,000
4,500
3,000
P/L Appropriation A/c
4,500
3,000
1,500
Balance c/d
44,200
31,200
18,200
50,500
37,500
24,500
50,500
37,500
24,500
Profit and Loss Appropriation Account
for the year ended March 31, 2018
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
Interest on Capital A/c
Profit and Loss
25,140
X (44,200 × 15%)
6,630
Interest on Drawings
Y (31,200 × 15%)
4,680
X (6,000 × 5%)
300
Z (18,200 × 15%)
2,730
14,040
Y (6,000 × 5%)
300
Profit transferred to :
Z (6,000 × 5%)
300
900
X’s Capital A/c
6,000
Y’s Capital A/c
4,000
Z’s Capital A/c
2,000
12,000
26,040
26,040
Partners’ Capital Accounts
for the year ended March 31,2018
Dr.
Cr.
Particulars
X
Y
Z
Particulars
X
Y
Z
Drawings A/c
6,000
6,000
6,000
Balance b/d
44,200
31,200
18,200
Interest on Drawing
300
300
300
Interest on Capital A/c
6,630
4,680
2,730
Balance c/d
50,530
33,580
16,630
P/L Appropriation A/c
6,000
4,000
2,000
56,830
39,880
22,930
56,830
39,880
22,930
Balance b/d
50,530
33,580
16,630
Cash A/c
51,280
34,080
16,880
Realisation A/c (Profit)
750
500
250
51,280
34,080
16880
51,280
34,080
16,880
Realisation Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
Sundry Assets
1,18,740
Creditors
20,000
Cash A/c:
Cash (Assets realised)
1,21,000
Creditors
20,000
Expanses
760
20,760
Profit transferred to:
X’s Capital A/c
750
Y’s Capital A/c
500
Z’s Capital A/c
250
1,500
1,41,000
1,41,000
Partners’ Capital Accounts
Dr.
Cr.
Particulars
X
Y
Z
Particulars
X
Y
Z
Balance b/d
50,530
33,580
16,630
Cash A/c
51,280
34,080
16,880
Realisation A/c (Profit)
750
500
250
51,280
34,080
16880
51,280
34,080
16,880
Cash Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
Balance b/d
2,000
Realisation A/c
20,760
Realisation A/c
1,21,000
X’s Capital A/c
51,280
Y’s Capital A/c
34,080
Z’s Capital A/c
16,880
1,23,000
1,23,000
Memorandum Balance Sheet
as on March 31, 2018
Liabilities
Amount
Rs
Assets
Amount
Rs
Capital A/cs:
Cash
2,000
X
50,530
Sundry Assets
1,18,740
Y
33,580
Z
16,630
1,00,740
Creditors
20,000
1,20,740
1,20,740

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