Question

A, B and C shared profits in the ratio if 1: 2 : 2. Following is their Balance Sheet on the date of dissolution:

Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Sundry Creditors		2,50,000	Cash at Bank		25,000
Bills Payable		25,000	Debtors	4,00,000
Workmen Compensation Reserve		30,000	Less: Provision for Doubtful Debts	20,000	3,80,000
A’s Loan		1,00,000	Stock		20,000
Capital Accounts:			Machinery		3,00,000
A	3,00,000		Land & Buildings		4,00,000
B	5,00,000	8,00,000	Advertisement Suspense Account		30,000
			Capital Account: C		50,000
Total		12,05,000	Total		12,05,000

Informations:

1. Land & Buildings were sold at 80% of the book value.
2. Stock was given to bills payable in full settlement.
3. Sundry creditors accepted machinery and paid ₹ 10,000 to the firm.
4. Debtors were all good.
5. An unrecorded assets estimated at ₹ 60,000 was taken over by partner B at ₹ 50,000.
6. Firm had to pay ₹ 40,000 as Workmen Compensation.
7. A's Loan was settled by giving him an unrecorded asset of ₹ 75,000 at ₹ 60,000 and the balance in cash.
8. Partner A is to be paid remuneration of ₹ 20,000 for dissolution work. Realisation expenses of ₹ 15,000 were paid by the firm.

Prepare necessary accounts.

Hint: Entry for settlement of A's Loan:

A's Loan A/c   Dr. 1,00,000
     To Bank A/c 40,000
     To Realisation A/с 60,000

Answer 1

Realisation Account
Particulars	₹	Particulars	₹
To Debtors A/c	4,00,000	By Provision for Doubtful Debts A/c	20,000
To Stock A/c	20,000	By Sundry Creditors A/c	2,50,000
To Machinery A/c	3,00,000	By Bills Payable A/c	25,000
To Land & Buildings A/c	4,00,000	By Workmen Compensation Reserve A/c	30,000
To Bank A/c – Workmen Compensation	40,000	By Bank A/c – Land & Buildings	3,20,000
To A’s Capital A/c – Remuneration	20,000	By Bank A/c – Debtors realised	4,00,000
To Bank A/c – Realisation Expenses	15,000	By Bank A/c – Amount received from Creditors	10,000
		By B’s Capital A/c – Unrecorded Asset	50,000
		By A’s Loan A/c – Unrecorded Asset	60,000
		By A’s Capital A/c – Loss	6,000
		By B’s Capital A/c – Loss	12,000
		By C’s Capital A/c – Loss	12,000
Total	11,95,000	Total	11,95,000

Loss on Realisation = ₹ 30,000

Loss shared in the ratio 1 : 2 : 2:

A = ₹ 6,000

B = ₹ 12,000

C = ₹ 12,000

A’s Loan Account
Particulars	₹	Particulars	₹
To Realisation A/c – Unrecorded Asset	60,000	By Balance b/d	1,00,000
To Bank A/c	40,000
Total	1,00,000	Total	1,00,000

 

Partners’ Capital Accounts
Particulars	A (₹)	B (₹)	C (₹)	Particulars	A (₹)	B (₹)	C (₹)
To Balance b/d	—	—	50,000	By Balance b/d	3,00,000	5,00,000	—
To Advertisement Suspense A/c	6,000	12,000	12,000	By Realisation A/c – Remuneration	20,000	—	—
To Realisation A/c – Unrecorded Asset	—	50,000	—	By Bank A/c – Cash brought in	—	—	74,000
To Realisation A/c – Loss	6,000	12,000	12,000
To Bank A/c	3,08,000	4,26,000	—
Total	3,20,000	5,00,000	74,000	Total	3,20,000	5,00,000	74,000

 

Bank Account
Particulars	₹	Particulars	₹
To Balance b/d	25,000	By A’s Loan A/c	40,000
To Realisation A/c – Land & Buildings	3,20,000	By Realisation A/c – Workmen Compensation	40,000
To Realisation A/c – Debtors	4,00,000	By Realisation A/c – Expenses	15,000
To Realisation A/c – Amount received from Creditors	10,000	By A’s Capital A/c	3,08,000
To C’s Capital A/c	74,000	By B’s Capital A/c	4,26,000
Total	8,29,000	Total	8,29,000