Question

P, Q and R started business on 1st April, 2023. They shared profit and loss in the ratio of 2 : 2 : 1. Capitals contributed by them were P ₹ 40,000; Q ₹ 30,000 and R ₹ 20,000. The partners were entitled to interest on capital @ 6% p.a.

During the year the firm earned a profit (before interest) of ₹ 25,000. The partners had withdrawn P ₹ 10,000; Q ₹ 8,000 and R ₹ 5,000.

On 31st March, 2024 the firm was dissolved. The assets realised ₹ 1,00,000. The creditors of ₹ 15,000 were paid at a discount of 3%. Expenses incurred on realisation were ₹ 1,450.

Prepare Partner’s Capital Accounts, Realisation Account, Cash Account, Profit and Loss Appropriation Account and Balance Sheet to close the books of the firm.

Answer 1

Dr.	Profit and Loss Appropriation A/c			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Interest on Capitals:		5,400	By Balance b/d (Profit for the year)	25,000
P	2,400
Q	1,800
R	1,200
To Profit transfered to:		19,600
P’s Capital A/c	7,840
Q’s Capital A/c	7,840
R’s Capital A/c	3,920
		25,000		25,000

 

Dr.	Realisation A/c			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Sundry Assets	1,07,000	By Creditors A/c		15,000
To Cash A/c (Creditors paid)	14,550	By Cash A/c (Asset realised)		1,00,000
To Cash A/c (Expenses on Realisation)	1,450	By Loss on Realisation t/f to Capital A/c:		8,000
		P	3,200
		Q	3,200
		R	1,600
	1,23,000			1,23,000

 

Dr.	Partner’s Capital A/c						Cr.
Particulars	P	Q	R	Particulars	P	Q	R
To Realisation A/c (Loss)	3,200	3,200	1,600	By Balance b/d	40,240	31,640	20,120
To Cash A/c	37,040	28,440	18,520
	40,240	31,640	20,120		40,240	31,640	20,120

 

Dr.	Cash A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Realisation A/c (Assets realised)	1,00,000	By Realisation A/c (Creditors paid)	14,550
		By Realisation A/c (Expenses on Realisation)	1,450
		By P’s Capital A/c	37,040
		By Q’s Capital A/c	28,440
		By R’s Capital A/c	18,520
	1,00,000		1,00,000

 

Balance sheet as at 31st March 2024.
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)
Creditors		15,000	Sundry Assets (Balancing figure)	1,07,000
P’s Capital	40,000	40,240
Add: Interest on Capital	2,400
Add: Net profit	7,840
Less: Drawings	10,000
Q’s Capital	30,000	31,640
Add: Interest on Capital	1,800
Add: Net profit	7,840
Less: Drawings	8,000
R’s Capital	20,000	20,120
Add: Interest on Capital	1,200
Add: Net profit	3,920
Less: Drawings	5,000
		1,07,000		1,07,000