Question

Arun, Tarun and Varun shared profits in the ratio of 2 : 2 : 1. On 31.12.2023 their Balance Sheet was as follows:

Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)
Creditors		50,000	Cash	30,000
Bills Payable		30,000	Debtors	50,000
Provident Fund		20,000	Stock	36,000
Investment Fluctuation Fund		8,000	Investments	20,000
Commission Received in Advance		12,000	Plant	90,000
Capitals:		1,40,000	Profit & Loss A/c	34,000
Arun	50,000
Tarun	60,000
Varun	30,000
		2,60,000		2,60,000

On this date the firm was dissolved. Arun was appointed to realise the assets. Arun was to receive 5% commission on the sale of assets (except cash) and was to bear all expenses of realisation.

Arun realised the assets as follows:

Stock ₹ 36,000, Debtors ₹ 45,000, Investments 80% of the book value, Plant ₹ 65,500. Expenses of realisation amounted to ₹ 5,500. Commission received in advance was returned to the customers after deducting ₹ 4,000. Firm had to pay ₹ 8,000 for outstanding wages. This liability was not provided for in the above Balance Sheet. ₹ 20,000 had to be paid for provident fund.

Prepare Realisation Account, Capital Accounts and Cash Account.

Hint: There will be no entry for the expenses of realisation, as these will be met by Arun personally.

Answer 1

Dr.	Realisation A/c				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Debtors A/c		50,000	By Creditors A/c		50,000
To Stock A/c		36,000	By Bills Payable A/c		30,000
To Investments A/c		20,000	By Provident Fund A/c		20,000
To Plant A/c		90,000	By Investment Fluctuation Fund A/c		8,000
To Cash A/c:		1,16,000	By Commission Received in Advance A/c		12,000
Commission Received in Advance return	8,000		By Cash A/c:		1,62,500
Outstanding wages	8,000		Stock	36,000
Provident Fund	20,000		Debtors	45,000
Creditors	50,000		Investments	16,000
Bills Payable	30,000		Plant	65,500
To Arun’s Capital A/c		8,125	By Loss on Realisation t/f to Capital A/c:		37,625
			Arun	15,050
			Tarun	15,050
			Varun	7,525
		3,20,125			3,20,125

 

Dr.	Partner’s Capital A/c						Cr.
Particulars	Arun	Tarun	Varun	Particulars	Arun	Tarun	Varun
To profit & loss A/c	13,600	13,600	6,800	By Balance b/d	50,000	60,000	30,000
To Realisation A/c (Loss)	15,050	15,050	7,525	By Realisation A/c (Commission)	8,125	-	-
To Cash A/c (Final Payment)	29,475	31,350	15,675
	58,125	60,000	30,000		58,125	60,000	30,000

 

Dr.	Cash A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	30,000	By Realisation A/c	1,16,000
To Realisation A/c (Asset realised)	1,62,500	By Arun’s Capital A/c	29,475
		By Tarun’s Capital A/c	31,350
		By Varun’s Capital A/c	15,675
	1,92,500		1,92,500