Question

The following is the Balance Sheet of A and B as at 31st March, 2024:

Liabilities	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Sundry Creditors	30,000	Cash in Hand		500
Bills Payable	8,000	Cash at Bank		8,000
Mrs. A’s Loan	5,000	Stock in Trade		5,000
Mrs. B’s Loan	10,000	Investments		10,000
General Reserve	10,000	Debtors	20,000	18,000
Investment Fluctuation Fund	1,000	Less: Provision	2,000
A’s Capital	10,000	Plant & Machinery		20,000
B’s Capital	10,000	Building		15,000
		Goodwill		4,000
		Profit & Loss A/c		3,500
	84,000			84,000

The firm was dissolved on 31st March, 2022 on the following terms:

1. A promised to pay off Mrs. A’s loan and took away stock-in-trade at ₹ 4,000;
2. B took away half of the investments at 10% discount;
3. Debtors realised ₹ 19,000;
4. Creditors and bills payable were due on an average basis of one month after 31st March, but they were paid immediately on 31st March, at 6% discount per annum;
5. Plant realised ₹ 25,000, Building ₹ 40,000, Goodwill ₹ 6,000 and remaining investments at ₹ 4,500.
6. There was an old typewriter in the firm which had been written off completely from the books. It is now estimated to realise ₹ 300. It was taken away by B at this estimated price;
7. Realisation expenses were ₹ 1,000.

Prepare the necessary ledger accounts in the books of A and B.

Hints:

1. Discount received on payment to Creditors `30,000xx6/100xx1/12` = ₹ 150
2. Discount received on payment to B/P `8,000xx6/100xx1/12`= ₹ 40
3. A bank account has been prepared in the question. Cash in hand balance of ₹ 500 has been transferred to the debit of Bank A/c.

Answer 1

Dr.	Realisation A/c				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Sundry Assets:			By Provision for Doubtful debts		2,000
Stock		5,000	By Creditors		30,000
Investment		10,000	By Bills payable		8,000
Debtors		20,000	By Mrs. A’s Loan		5,000
Plant & Machinery		20,000	By Mrs. B’s Loan		10,000
Building		15,000	By Investment Fluctuation Fund		1,000
Goodwill		4,000	By A’s Capital A/c (stock in trade)		4,000
To Bank A/c (Realisation Expense)		1,000	By B’s Capital A/c (half of investment at 10% discount)		4,500
To Bank A/c (Bills Payable)		7,960	By Bank A/c:		94,500
To Bank A/c (Mrs. B’s Loan)		10,000	Debtors	19,000
To Bank A/c (Sundry Creditors)		29,850	Plant	25,000
To A’s Capital A/c (Mrs. A’s Loan)		5,000	Building	40,000
To Profit on Realisation t/f to Capital A/c:		31,490	Goodwill	6,000
A	15,745		Investments	4,500
B	15,745		By B’s Capital A/c (unrecorded asset)		300
		1,59,300			1,59,300

 

Dr.	Partner’s Capital A/c				Cr.
Particulars	A	B	Particulars	A	B
To Realisation A/c (stock in trade)	4,000	-	By Balance b/d	10,000	10,000
To Realisation A/c (Investments)	-	4,500	By General Reserves	5,000	5,000
To Realisation A/c (unrecorded asset)	-	300	By Realisation A/c - (Profit)	15,745	15,745
To Profit & loss A/c	1,750	1,750	By Realisation A/c - (Mrs. A’s Loan)	5,000	-
To Bank A/c	29,995	24,195
	35,745	30,745		35,745	30,745

 

Dr.	Bank A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	8,000	By Realisation A/c (Sundry Creditors)	29,850
To Realisation A/c (Sundry Assets realised)	94,500	By Realisation A/c (Bills Payable)	7,960
To Cash A/c	500	By Realisation A/c (Mrs. B’s Loan)	10,000
		By A’s Capital A/c	29,995
		By B’s Capital A/c	24,195
	1,03,000		1,03,000

Working notes:

Calculate of discount on Creditors and Bills Payable:

Creditors = `30,000xx1/12xx6/100` = ₹ 150

Bills Payable = `8,000xx1/12xx6/100` = ₹ 40