Question

A, B and C were in partnership sharing profits in the ratio of 2 : 1 : 1. Their Balance Sheet showed the following position on the date of dissolution:

Liabilities	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Creditors	40,000	Fixed Assets		50,000
Bills Payable	10,000	Stock		60,000
A’s Loan	20,000	Debtors	30,000	28,000
Mrs. A’s Loan	16,000	Less: Provision	2,000
Workmen Compensation Reserve	20,000	Furniture		20,000
Capitals: A	40,000	Goodwill		18,000
B	20,000	Cash at Bank		10,000
C	20,000
	1,86,000			1,86,000

1. A agreed to take over furniture at 20% less than the book value.
2. Stock was realised for ₹ 52,400.
3. Bad Debts amounted to ₹ 5,000.
4. Expenses of realisation were ₹ 3,000. Creditors were paid at a discount of 5%.
5. There was a claim of ₹ 6,400 for damages against the firm. It had to be paid.

Prepare necessary accounts.

Hints:

1. Nothing is mentioned in the question about the payment of B/P and Mrs. A’s loan. It will be assumed that these will be paid in full.
2. Nothing is mentioned in the question about the realisation of fixed assets. It will be assumed that it has realised at the book value given in the balance sheet, i.e., at ₹ 50,000.

Answer 1

Dr.	Realisation A/c			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Sundry Assets:		By Creditors		40,000
Fixed Assets	50,000	By Bills Payable		10,000
Stock	60,000	By Mrs. A’s Loan		16,000
Debtors	30,000	By Provision for Doubtful Debts A/c		2,000
Furniture	20,000	By Bank A/c		1,27,400
Goodwill	18,000	Stock	52,400
To Bank A/c (Creditors) (40,000 – 5%)	38,000	Debtors	25,000
To Bank A/c (Bills Payable)	10,000	Fixed Assets	50,000
To Bank A/c (Mrs. A’s Loan)	16,000	By A’s Capital A/c (20,000 – 20%)		16,000
To Bank A/c (Realisation expenses)	3,000	To Realisation Loss t/f to Capital A/c:
To Bank A/c (damages against firm)	6,400	A	20,000
		B	10,000
		C	10,000	40,000
	2,51,400			2,51,400

 

Dr.	Partner’s Capital A/c						Cr.
Particulars	A	B	C	Particulars	A	B	C
To Realisation A/c - Loss	20,000	10,000	10,000	By Balance b/d	40,000	20,000	20,000
To Furniture A/c	16,000	-	-	By Workmen Compensation Reserve A/c	10,000	5,000	5,000
To Bank A/c	14,000	15,000	15,000
	50,000	25,000	25,000		50,000	25,000	25,000

 

Dr.	A’s loan A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Bank A/c	20,000	By Balance b/d	20,000
	20,000		20,000

 

Dr.	Bank A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	10,000	By Realisation A/c (Creditors)	38,000
To Realisation A/c (Sundry debtors realised)	1,27,400	By Realisation A/c (Bills Payable)	10,000
		By Realisation A/c (Mrs. A’s Loan)	16,000
		By Realisation A/c (Realisation expense)	3,000
		By Realisation A/c (damages against firm)	6,400
		By Mrs. A’s Loan A/c	20,000
		By A Capital A/c	14,000
		By B Capital A/c	15,000
		By C Capital A/c	15,000
	1,37,400		1,37,400