Question

Sanjay and Sameer were partners in a firm sharing profits in the ratio of 2 : 3. On 31.3.2024 their Balance Sheet was as follows:

Balance sheet of Sanjay and Sameer as at 31.3.2024.
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)
Capital:		5,00,000	Land and Building	3,00,000
Sanjay	2,00,000		Stock	1,00,000
Sameer	3,00,000		Debtors	1,50,000
Creditors		1,05,000	Bank	1,55,000
Workmen Compensation Reserve		1,00,000
		7,05,000		7,05,000

The firm was dissolved on 1.4.2024 and the assets and liabilities were settled as follows:

1. Sanjay agreed to take over land and building at ₹ 3,50,000 by paying cash;
2. Stock was sold for ₹ 90,000;
3. Creditors accepted Debtors in full settlement of their claim.

Pass necessary journal entries for dissolution of the firm.

Hints:

1. Prepare Realisation A/c in working notes. Loss on Realisation will be ₹ 5,000.
2. Workmen Compensation Reserve will be credited to Partner’s Capital Accounts.
3. There will be no entry for Creditors taking over Debtors in full settlement.

Answer 1

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
(1)	Realisation A/c    ...Dr.		5,50,000	-
	To Land & Buildings A/c		-	3,00,000
	To Stock A/c		-	1,00,000
	To Debtors A/c		-	1,50,000
	(Being Sundry Assets transferred to Realisation A/c)
(2)	Creditors A/c     ...Dr.		1,05,000	-
	To Realisation A/c		-	1,05,000
	(Being Creditors transferred to Realisation A/c)
(3)	Bank A/c    ...Dr.		4,40,000	-
	To Realisation A/c		-	4,40,000
	(Being Sundry Assets realised)
(4)	Sanjay’s Capital A/c    ...Dr.		2,000	-
	Sameer’s Capital A/c    ...Dr.		3,000	-
	To Realisation A/c		-	5,000
	(Being Realisation Loss debited to partners in 2 : 3)
(5)	Workmen Compensation Reserve A/c    ...Dr.		1,00,000	-
	To Sanjay’s Capital A/c		-	40,000
	To Sameer’s Capital A/c		-	60,000
	(Being Workmen Compensation Reserve credited in 2 : 3)
(6)	Sanjay’s Capital A/c    ...Dr.		2,38,000	-
	Sameer’s Capital A/c    ...Dr.		3,57,000	-
	To Bank A/c		-	5,95,000
	(Being Final Payment made to partners)

Working Notes:

Dr.	Realisation A/c			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Sundry Assets A/c/:		By Creditors A/c		1,05,000
Land & Building	3,00,000	By Bank A/c (Asset realised)		4,40,000
Machinery	1,00,000	Stock	90,000
Debtors	1,50,000	Land & Building	3,50,000
		By Loss on Realisation t/f to Capital A/c:		5,000
		Sanjay	2,000
		Sameer	3,000
	5,50,000			5,50,000

 

Dr.	Partner’s Capital A/c				Cr.
Particulars	Sanjay	Sameer	Particulars	Sanjay	Sameer
To Realisation A/c (Loss)	2,000	3,000	By Balance b/d	2,00,000	3,00,000
To Bank A/c (Final Payment)	2,38,000	3,57,000	By Workmen Compensation Reserve A/c	40,000	60,000
	2,40,000	3,60,000		2,40,000	3,60,000

 

Dr.	Bank A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	1,55,000	By Sanjay’s Capital A/c	2,38,000
To Realisation A/c (Asset realised)	4,40,000	By Sameer’s Capital A/c	3,57,000
	5,95,000		5,95,000