Question

Pritam and Naresh decided to dissolve their firm on September 30, 2023, when their Balance Sheet stood as follows:

Liabilities	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capital Accounts:		Cash at Bank		400
Pritam	40,000	Stock-in-Trade		21,500
Naresh	20,000	Bills Receivable		8,800
Loan Accounts:		Sundry Debtors	45,000	43,500
Naresh	14,000	Less: Provision for Bad Debts	1,500
Mrs. Pritam	10,000	Furniture		3,000
Sundry Creditors	36,000	Plant & Machinery		23,000
Outstanding Rent	500	Goodwill		20,300
	1,20,500			1,20,500

The assets were realised as follows:- Stock ₹ 20,000; Bills Receivable ₹ 3,800; Furniture ₹ 5,100; Plant & Machinery ₹ 35,000; Sundry Debtors at 10% less than book value.

Sundry Creditors allowed a discount of 5%. Pritam agreed to pay his wife’s loan. Naresh agreed to pay outstanding rent. Expenses on dissolution came to ₹ 800.

Pritam and Naresh shared profits and losses in the ratio of their Capitals. Accounts were finally settled.

Prepare Journal, Realisation Account, Capital Accounts and Bank Account.

Hint: Goodwill will be debited to Realisation A/c and no further entry will be made in respect of this item.

Answer 1

Journal Entry
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
(i)	Realisation A/c    ...Dr.		1,21,600	-
	To Stock-in-Trade A/c		-	21,500
	To Bills Receivable A/c		-	8,800
	To Sundry Debtors A/c		-	45,000
	To Furniture A/c		-	3,000
	To Plant & Machinery A/c		-	23,000
	To Goodwill A/c		-	20,000
	To Prepaid Insurance A/c		-	300
	(Being assets transferred to Realisation A/c)
(ii)	Sundry Creditors A/c    ...Dr.		36,000	-
	Outstanding Rent    ...Dr.		500	-
	To Realisation A/c		-	36,500
	(Being liabilities transferred to Realisation A/c)
(iii)	Provision for Doubtful Debts A/c    ...Dr.		1,500	-
	To Realisation A/c		-	1,500
	(Being Provision for Doubtful Debts transferred to Realisation A/c)
(iv)	Realisation A/c    ...Dr.		10,000	-
	To Pritam’s Capital A/c		-	10,000
	(Being Mrs. Pritam loan taken over)
(v)	Realisation A/c    ...Dr.		500	-
	To Naresh’s Capital A/c		-	500
	(Being Outstanding Rent taken over)
(vi)	Realisation A/c    ...Dr.		14,700	-
	To Pritam’s Capital A/c		-	9,800
	To Naresh’s Capital A/c		-	4,900
	(Being Realisation profit credited to partners in 2 : 1)

 

Dr.	Realisation A/c			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Sundry Assets:		By Sundry Creditors		36,000
Stock-in-Trade	21,500	By Mrs. Pritam		10,000
Bills Receivable	8,800	By Outstanding Rent		500
Sundry Debtors	45,000	By Provision for Bad debts A/c		1,04,400
Furniture	3,000	Stock	20,000
Plant & Machinery	23,000	Bills Receivable	3,800
Goodwill	20,000	Furniture	5,100
Prepaid Insurance	300	Plant & Machinery	35,000
To Bank A/c (Sundry Creditors)	34,200	Sundry Debtors	40,500
To Pritam’s Capital A/c (Mrs. Pritam loan taken over)	10,000	By Loss on Realisation t/f to Capital A/c:		14,700
To Naresh’s Capital A/c (Outstanding Rent taken over)	500	Pritam	9,800
To Bank A/c (Dissolution Expenses)	800	Naresh	4,900
	1,67,100			1,67,100

 

Dr.	Partner’s Capital A/c				Cr.
Particulars	Pritam	Naresh	Particulars	Pritam	Naresh
To Realisation A/c - Loss	9,800	4,900	By Balance b/d	40,000	20,000
To Bank A/c	40,200	15,600	By Realisation A/c - (Loan taken over)	10,000	-
			By Realisation A/c (Outstanding Rent taken over)	-	500
	50,000	20,500		50,000	20,500

 

Dr.	Naresh’s loan A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Bank A/c	14,000	By Balance b/d	14,000
	14,000		14,000

 

Dr.	Bank A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	400	By Bank A/c (Sundry Creditors)	34,200
To Realisation A/c (Sundry Assets realised)	1,04,400	By Bank A/c (Dissolution Expenses)	800
		By Naresh’s Loan A/c	14,000
		By Pritam’s Capital A/c	40,200
		By Naresh’s Capital A/c	15,600
	1,04,800		1,04,800