Question

A, B and C are equal partners in a firm. The Balance Sheet of the firm at the date of dissolution was as follows:

Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Creditors		40,000	Lease		80,000
Provision for Depreciation on Plant		8,600	Plant		40,000
A’s Wife Loan		10,000	Patent Rights		30,000
Capital Accounts:		1,67,000	Furniture		15,000
A	62,000		Stock		20,000
B	54,000		Book Debts	26,000	25,000
C	51,000		Less: Provision	1,000
			Cash at Bank		14,000
			Cash-in-Hand		1,600
		2,25,600			2,25,600

B was appointed to realise the assets and pay the liabilities. He was entitled to receive 10% commission on the amounts finally paid to other partners as capital. He was also to bear the expenses of realisation.

You are informed that:

1. An old typewriter, written off completely from the firm’s books, is now estimated to realise ₹ 1,400. It is taken over by B at this estimated price.
2. A agreed to accept furniture in full settlement of his wife’s loan.
3. Assets realised as follows: Lease ₹ 1,00,000; Plant at ₹ 36,000; Stock ₹ 12,000; ₹ 8,000 of the book debts proved bad.
4. Expenses of realisation amounted to ₹ 800.
5. Creditors accepted patent rights at a discount of 20% in part satisfaction of their claim. Out of their balance they were paid 50% in full satisfaction.
6. The partnership had previously purchased some shares at ₹ 20,000 in a public limited company and had written them off as worthless. These shares were taken over by B at ₹ 4,000.

Prepare necessary accounts.

Hints:

(1) 

Commission Payable to B will be:		₹
10/110 on payment to A =	`66,000xx10/110`	6,000
10/110 on payment to C =	`55,000xx10/110`	5,000
		11,000

(2) There will be no entry for the payment of realisation expenses and A’s Wife Loan. Creditors will be paid only ₹ 8,000.

(3) Provision for Depreciation on Plant will be Credited to Realisation A/c and no further entry will be passed for it.

Answer 1

Dr.	Realisation A/c				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Lease A/c		80,000	By Creditors A/c		40,000
To Plant A/c		40,000	By Provision for Depreciation on Plant A/c		8,600
To Patent Rignts A/c		30,000	By A’s Wife Loan A/c		10,000
To Furniture A/c		15,000	By Bank A/c (Assets realised)		1,56,000
To Stock A/c		20,000	Lease	1,00,000
To Book Debts A/c		26,000	Plant	36,000
To Bank A/c (Creditors)		8,000	Stock	12,000
To Profit on Realisation t/f to Capital A/c:		12,000	Book Debts	18,000
A	4,000		By B’s Capital A/c (Typewriter)		1,400
B	4,000		By B’s Capital A/c (Shares)		4,000
C	4,000		By Bank A/c (Patent)		11,000
		2,31,000			2,31,000

 

Dr.	Partner’s Capital A/c						Cr.
Particulars	A	B	C	Particulars	A	B	C
To Realisation A/c (Shares)	-	4,000	-	By Balance b/d	62,000	54,000	51,000
To B’s Capital A/c (Commission)	6,000	-	5,000	By Realisation A/c (Profit)	4,000	4,000	4,000
To Realisation A/c (Typewriter)	-	1,400	-	To A’s Capital A/c (Commission)	-	6,000	-
To Bank A/c (Final Payment)	60,000	63,600	50,000	To C’s Capital A/c (Commission)	-	5,000	-
	66,000	69,000	55,000		66,000	69,000	55,000

 

Dr.	Bank A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	14,000	By Realisation A/c (Creditors paid)	8,000
To Cash A/c	1,600	By A’s Capital A/c	60,000
To Realisation A/c (Asset realised)	1,56,000	By B’s Capital A/c	63,600
To Realisation A/c (Patent)	11,000	By C’s Capital A/c	50,000
	1,81,600		1,81,600