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.

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

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Solution

Dr.
Realisation A/c
Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

To Investments
30,000
By Investment Fluctuation Reserve
8,000

To Debtors
40,000
By Provision for Doubtful Debts
4,000

To Bills Receivable
33,400
By Creditors
40,000

By Bills Payable
40,000

To Yogesh’s Capital A/c (Wife’s Loan)
42,000
By Mrs. Yogesh’s Loan
42,000

To Cash/Bank A/c:

Creditors [40,000 – (40,000 × 15/100 × 2/12)] 39,000

By Cash/Bank A/c:

Bills Payable [40,000 – (40,000 × 15/100 × 2/12)] 39,000
78,000
Debtors
30,000

Bills Receivable
31,730

To Naresh’ Capital A/c (Commission)
10,000
Bad Debt Recovered
15,000

To Realisation Gain transferred to:

Unrecorded Asset
10,000

86,730

Yogesh’s Capital A/c
6,665

Naresh’s Capital A/c
6,665

13,330
By Naresh’s Capital A/c (Investment taken over)
26,000

2,46,730

2,46,730

Dr.
Partner’s Capital A/c
Cr.

Particulars

Yogesh

(₹)

Naresh

(₹)

Particulars

Yogesh

(₹)

Naresh

(₹)

To Realisation A/ c (Asset taken over)

26,000
By balance b/d
21,000

21,000

By Realisation A/c (Gain)
6,665

6,665

To Profit & Loss A/c
55,300

55,300
By Realisation A/c (Liability paid)
42,000

To Cash/Bank A/c
14,365

–

By Realisation A/c (Commission)

10,000

By Naresh’s Loan A/c

43,635

69,665

81,300

69,665

81,300

Dr.
Naresh’s Loan A/c
Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

To Naresh’s Capital A/c
43,635
By balance b/d
44,000

To Cash/Bank A/c
365

44,000

44,000

Dr.
Cash/ Bank A/c
Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

To balance b/d
6,000
By Yogesh’s Capital A/c
14,365

To Realisation A/c (Asset Realised)
86,730
By Naresh’s Loan A/c
365

By Realisation A/c (Liabilities Paid)
78,000

92,730

92,730

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Similar questions

Q. Pradeep and Rajesh were partners in a firm sharing profits and losses in the ratio of 3 : 2. They decided to dissolve their partnership firm on 31st March, 2018. Pradeep was deputed to realise the assets and to pay off the liabilities. He was paid ₹ 1,000 as commission for his services. The financial position of the firm on 31st March, 2018 was as follows:

BALANCE SHEET as at 31st March, 2018
Liabilities		Amount (₹)	Assets		Amount (₹)
Creditors		80,000	Building		1,20,000
Mrs. Pradeep's Loan		40,000	Investment		30,600
Rajesh's Loan		24,000	Debtors	34,000
Investment Fluctuation Fund		8,000	Less: Provision for Doubtful Debts	4,000	30,000
Capital A/cs:			Bills Receivable		37,400
Pradeep	42,000		Bank		6,000
Rajesh	42,000	84,000	Profit and Loss A/c		8,000
			Goodwill		4,000
		2,36,000			2,36,000

Following terms and conditions were agreed upon:
(a) Pradeep agreed to pay off his wife's loan.
(b) Half of the debtors realised ₹ 12,000 and remaining debtors were used to pay off 25% of the creditors.
(c) Investment sold to Rajesh for ₹ 27,000.
(d) Building realised ₹ 1,52,000.
(e) Remaining creditors were to be paid after two months, they were paid immediately at 10% p.a. discount.
(f) Bill receivables were settled at a loss of ₹ 1,400.
(g) Realisation expenses amounted to ₹ 2,500.
Prepare Realisation Account.

Q. 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 .

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.

Rita, Geeta and Ashish were partners in a firm sharing profits/losses in the ratio of 3:2:1. On March 31, 2017 their balance sheet was as follows:

Liabilities		Amount Rs	Assets	Amount Rs
Capitals:			Cash	22,500
Rita	80,000		Debtors	52,300
Geeta	50,000		Stock	36,000
Ashish	30,000	1,60,000	Investments	69,000
Creditors		65,000	Plant	91,200
Bills payable		26,000
General reserve		20,000
		2,71,000		2,71,000

On the date of above mentioned date the firm was dissolved:

1. Rita was appointed to realise the assets. Rita was to receive 5% commission on the rate of assets (except cash) and was to bear all expenses of Realisation,

2. Assets were realised as follows:

	Rs
Debtors	30,000
Stock	26,000
Plant	42,750

3. Investments were realised at 85% of the book value,

4. Expenses of Realisation amounted to Rs 4,100,

5. Firm had to pay Rs 7,200 for outstanding salary not provided for earlier,

6. Contingent liability in respect of bills discounted with the bank was also materialised and paid off Rs 9,800,

Prepare Realisation Account, Capital Accounts of Partners’ and Cash Account.

Q. Rita and Sobha are partners in a firm, Fancy Garments Exports, sharing profits and losses equally. On 1st April, 2019, the Balance Sheet of the firm was:


Liabilities		Amount (₹)	Assets		Amount (₹)
Sundry Creditors		75,000	Cash		6,000
Bills Payable		30,000	Bank		30,000
Rita's Loan		15,000	Stock		75,000
Reserve		24,000	Book Debts	66,000
Capital A/cs:			Less: Provision for Doubtful Debts	6,000	60,000
Rita	90,000
Sobha	30,000	1,20,000	Plant and Machinery		45,000
			Land and Building		48,000

		2,64,000			2,64,000

The firm was dissolved on the date given above. The following transactions took place:
(a) Rita took 25% of the Stock at a discount of 20% in settlement of her loan.
(b) Book Debts realised ₹ 54,000; balance of the Stock was sold at a profit of 30% on cost.
(c) Sundry Creditors were paid out at a discount of 10%. Bills Payable were paid in full .
(d) Plant and Machinery realised ₹ 75,000. Land and Building ₹ 1,20,000.
(e) Rita took the goodwill of the firm at a value of ₹ 30,000.
(f) An unrecorded asset of ₹ 6,900 was handed over to an unrecorded liability of ₹ 6,000 in full settlement.
(g) Realisation expenses were ₹ 5,250.
Show Realisation Account, Partners' Capital Accounts and Bank Account in the books of the firm.

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Dr.	Naresh’s Loan A/c				Cr.
Particulars		Amount (₹)	Particulars	Amount (₹)
To Naresh’s Capital A/c		43,635	By balance b/d	44,000
To Cash/Bank A/c		365

		44,000		44,000

Dr.	Realisation A/c							Cr.
Particulars				Amount (₹)	Particulars		Amount (₹)
To Investments				30,000	By Investment Fluctuation Reserve		8,000
To Debtors				40,000	By Provision for Doubtful Debts		4,000
To Bills Receivable				33,400	By Creditors		40,000
					By Bills Payable		40,000
To Yogesh’s Capital A/c (Wife’s Loan)				42,000	By Mrs. Yogesh’s Loan		42,000
To Cash/Bank A/c:
Creditors [40,000 – (40,000 × 15/100 × 2/12)]		39,000			By Cash/Bank A/c:
Bills Payable [40,000 – (40,000 × 15/100 × 2/12)]		39,000		78,000	Debtors	30,000
					Bills Receivable	31,730
To Naresh’ Capital A/c (Commission)				10,000	Bad Debt Recovered	15,000
To Realisation Gain transferred to:					Unrecorded Asset	10,000	86,730
Yogesh’s Capital A/c			6,665
Naresh’s Capital A/c			6,665	13,330	By Naresh’s Capital A/c (Investment taken over)		26,000

				2,46,730			2,46,730

Dr.	Partner’s Capital A/c						Cr.
Particulars		Yogesh (₹)	Naresh (₹)	Particulars	Yogesh (₹)	Naresh (₹)
To Realisation A/ c (Asset taken over)			26,000	By balance b/d	21,000	21,000
				By Realisation A/c (Gain)	6,665	6,665
To Profit & Loss A/c		55,300	55,300	By Realisation A/c (Liability paid)	42,000
To Cash/Bank A/c		14,365	–
				By Realisation A/c (Commission)		10,000
				By Naresh’s Loan A/c		43,635

		69,665	81,300		69,665	81,300

Dr.	Cash/ Bank A/c				Cr.
Particulars		Amount (₹)	Particulars	Amount (₹)
To balance b/d		6,000	By Yogesh’s Capital A/c	14,365
To Realisation A/c (Asset Realised)		86,730	By Naresh’s Loan A/c	365
			By Realisation A/c (Liabilities Paid)	78,000

		92,730		92,730