Question

X, Y and Z decided to dissolve their partnership firm. The position as at 31st December, 2023, the date of dissolution was as follows:

Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)
Creditors		20,000	Freehold Property	40,000
Bank Loan		5,000	Machinery	40,000
Capitals: X	70,000	1,30,000	Investments	16,000
Y	40,000		Stock	30,000
Z	20,000		Debtors	30,000
Current Accounts:		19,500	Cash	10,000
X	12,000		Loss in Business	20,000
Y	7,500		Current Account: Z	4,500
Reserve for Contingency		10,000
Commission Received in Advance		6,000
		1,90,500		1,90,500

They shared profits in the ratio of X : `1/2, "Y" : 3/10  "and"  "Z" : 1/5`.

X agreed to bear all realisation expenses. For this service X is paid ₹ 2,000. Actual expenses amounted to ₹ 3,200 which was withdrawn by him from the firm.

Other informations are:

1. Assets, with the exception of investments and Cash, are sold for ₹ 1,25,100. 75% of the investments are taken over by X at 75% of their book value. He also agrees to discharge the Bank Loan. The remaining investments were taken over by Y at the market value of 120%.
2. There were outstanding expenses amounting to ₹ 5,000. These were settled for ₹ 2,000.
3. Commission received in advance was returned to the Customers after deducting 60% for work done.

You are required to prepare the necessary accounts.

Hints: 

1.

(i)	Realisation A/c    ...Dr.	2,000	-
	To X A/c	-	2,000
(ii)	X A/c    ...Dr.	3,200	-
	To Cash A/c	-	3,200

Answer 1

Realisation Account
Particulars	₹	Particulars	₹
To Freehold Property A/c	40,000	By Creditors A/c	20,000
To Machinery A/c	40,000	By Bank Loan A/c	5,000
To Investments A/c	16,000	By Commission Received in Advance A/c	6,000
To Stock A/c	30,000	By Cash A/c – Assets realised	1,25,100
To Debtors A/c	30,000	By X’s Capital A/c – Investments taken over	9,000
To Cash A/c – Creditors paid	20,000	By Y’s Capital A/c – Investments taken over	4,800
To Cash A/c – Outstanding Expenses	4,500	By X’s Capital A/c – Loss on Realisation	10,000
To Cash A/c – Commission refunded	2,400	By Y’s Capital A/c – Loss on Realisation	6,000
To X’s Capital A/c – Bank Loan taken over	5,000	By Z’s Capital A/c – Loss on Realisation	4,000
To X’s Capital A/c – Remuneration	2,000
Total	1,89,900	Total	1,89,900

Loss on Realisation = ₹ 20,000

Loss shared in the ratio `1/2 : 3/10 : 1/5` = 5 : 3 : 2

X = ₹ 10,000

Y = ₹ 6,000

Z = ₹ 4,000

Partners’ Capital Accounts
Particulars	X (₹)	Y (₹)	Z (₹)	Particulars	X (₹)	Y (₹)	Z (₹)
To Current A/c	—	—	4,500	By Balance b/d	70,000	40,000	20,000
To Loss in Business A/c	10,000	6,000	4,000	By Current A/c	12,000	7,500	—
To Realisation A/c – Investments	9,000	4,800	—	By Reserve for Contingency A/c	5,000	3,000	2,000
To Realisation A/c – Loss	10,000	6,000	4,000	By Realisation A/c – Bank Loan taken over	5,000	—	—
To Cash A/c – Expenses withdrawn	3,200	—	—	By Realisation A/c – Remuneration	2,000	—	—
To Cash A/c	61,800	33,700	9,500
Total	94,000	50,500	22,000	Total	94,000	50,500	22,000

 

Cash Account
Particulars	₹	Particulars	₹
To Balance b/d	10,000	By Realisation A/c – Creditors	20,000
To Realisation A/c – Assets realised	1,25,100	By Realisation A/c – Outstanding Expenses	4,500
		By Realisation A/c – Commission refunded	2,400
		By X’s Capital A/c – Expenses withdrawn	3,200
		By X’s Capital A/c	61,800
		By Y’s Capital A/c	33,700
		By Z’s Capital A/c	9,500
Total	1,35,100	Total	1,35,100

Working Notes:

75% of Investments = ₹ 16,000 × 75% = ₹ 12,000

Taken over by X at 75% = ₹ 12,000 × 75% = ₹ 9,000

Remaining Investments = ₹ 4,000

Taken over by Y at 120% = ₹ 4,000 × 120% = ₹ 4,800

Commission returned = ₹ 6,000 × 40% = ₹ 2,400