Question

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

Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Creditors		30,000	Bank		15,000
Mrs. A’s Loan		20,000	Bills Receivable		12,000
Outstanding Salary		8,000	Stock		40,000
Investment Fluctuation Fund		10,000	Sundry Debtors	40,000	36,000
Reserves		12,000	Less: Provision for Doubtful Debts	4,000
Capital Accounts:		1,20,000	Land and Buildings		50,000
A	60,000		Furniture		10,000
B	40,000		Typewriters		7,000
C	20,000		Investments		28,500
			Accrued Income		1,500
		2,00,000			2,00,000

The profit and loss sharing ratios of the partners are 3 : 2 : 1. At the above date, partners decide to dissolve the firm. The assets realised were as follows:

1. Bills Receivable were realised at a discount of 5%. Debtors were all good; Stock realised ₹ 32,000. Land and Buildings realised at 40% higher than the book value.
2. Furniture was sold for ₹ 6,000 by auction and auctioneer’s commission amounted to ₹ 300.
3. Typewriters were taken over by A for an agreed valuation of ₹ 5,000.
4. Investments were sold in the open market at a price of ₹ 25,000, for which a commission of 2% was paid to the broker and Accrued Income could not be realised.
5. Creditors agreed to accept 10% less. All other liabilities were paid off at their book value.
6. The firm retrenched their employees three months before the dissolution of the firm and the firm had to pay ₹ 25,000 as compensation. This liability was not appearing in the above Balance Sheet.

Close the books of the firm by preparing Realisation Account, Partner’s Capital Accounts, and Bank Account.

Hint: Amount realised from Sundry Debtors: ₹ 40,000.

Answer 1

Dr.	Realisation A/c				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Sundry Assets:			By Creditors		30,000
Bills Receivable		12,000	By Mrs. A’s Loan		20,000
Stock		40,000	By Outstanding Salary		8,000
Sundry Debtors		40,000	By Provision for Doubtful Debts		4,000
Land and Buildings		50,000	By Investment Fluctuation Fund		10,000
Furniture		10,000	By Bank A/c		1,83,600
Typewriters		7,000	Bills Receivable	11,400
Investments		28,500	Sundry Debtors	40,000
Accrued Income		1,500	Stock	32,000
To Bank A/c (Creditors)		27,000	Land and Buildings	70,000
To Bank A/c (Mrs. A’s Loan)		20,000	Furniture	5,700
To Bank A/c (Outstanding Salary)		8,000	Investments	24,500
To Bank A/c (Compensation to Employees)		25,000	By A’s Capital A/c (Typewriter taken over)		5,000
			By Loss on Realisation t/f to Capital A/c:		8,400
			A	4,200
			B	2,800
			C	1,400
		2,69,000			2,69,000

 

Dr.	Partner’s Capital A/c						Cr.
Particulars	A	B	C	Particulars	A	B	C
To Realisation A/c (Loss)	4,200	2,800	1,400	By Balance b/d	60,000	40,000	20,000
To Realisation A/c (Typewriter taken over)	5,000	-	-	By Reserves	6,000	4,000	2,000
To Bank A/c	56,800	41,200	20,600
	66,000	44,000	22,000		66,000	44,000	22,000

 

Dr.	Bank A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	15,000	By Realisation A/c (Creditors)	27,000
To Realisation A/c (Sundry Assets realised)	1,83,600	By Realisation A/c (Mrs. A’s Loan)	20,000
		By Bank A/c (Outstanding Salary)	8,000
		By Bank A/c (Compensation to Employees)	25,000
		By A Capital A/c	56,800
		By B Capital A/c	41,200
		By C Capital A/c	20,600
	1,98,600		1,98,600