Question

Mita and Sita, sharing profits in, the ratio 2 : 1, decided to dissolve their partnership firm on 31^st March, 2022, on which date their Balance Sheet was as under:

Balance Sheet of Mita and Sita as on 31st March, 2022
Liabilities		(₹)	Assets		(₹)
Sundry Creditors		40,000	Land & Building		29,000
Sita's Son's Loan		2,000	Plant & Machinery		20,000
Bank Overdraft		8,000	Stock		3,000
Capital Accounts:			Debtors	26,400	26,000
Mita	20,000	30,000	Less: Provision for Doubtful Debts	400
Sita	10,000		Bank		2,000
		80,000			80,000

The partnership firm was dissolved on the date of the Balance Sheet subject to the following adjustments:

1. Trade creditors accepted plant and machinery at an agreed valuation of 10% less than the book value and the balance in cash in full settlement of their claims.
2. Debtors of ₹ 1,000 proved bad.
3. Sita took over the stock at a discount of 20%.
4. Realisation expenses of ₹ 1,100 were paid by the firm.

You are required to prepare the Realisation Account.

Answer 1

Dr.	Realisation Account			Cr.
Particulars	Amount (₹)	Particulars	(₹)	Amount (₹)
To Land and Building	29,000	By Provision for Doubtful Debts		400
To Plant & Machinery	20,000	By Sundry Creditors		40,000
To Stock	3,000	By Sita's Son's Loan		2,000
To Debtors	26,400	By Sita's capital A/c (stock)		2,400
To Bank (Creditors paid)	22,000	By Bank:
To Bank (Expenses)	1,100	Debtors	25,400	25,400
To Bank (Sita's son's loan)	2,000	By Loss Transferred to:
		Mita's Capital A/c	22,200	33,300
		Sita's Capital A/c	11,100
	1,03,500			1,03,500

Amount payable to creditors = 40,000 - (20,000 - (20,000 × 10%))

= 40,000 - 18,000

= ₹ 22,000