Commerce (English Medium) इयत्ता १२ - CBSE Question Bank Solutions for Accountancy

What is a Realisation Account?

Land and Building (book value) ₹ 1,60,000 sold for ₹ 3,00,000 through a broker who charged 2% commission on the deal. Journalise the transaction, at the time of dissolution of the firm.

Answer the following question:
State any two situations when a partnership firm can be compulsorily dissolved.

Gaurav, Saurabh, and Vaibhav were partners in firm sharing profits and losses in the ratio of 2 : 2 : 1. They decided to dissolve the firm on 31^st March 2018. After transferring Sundry assets (other than cash in hand and cash at Bank) and third-party liabilities to realisation account, the assets were realized and liabilities were paid off as follows:

1. A machinery with a book value of ₹ 6,00,000 was taken over by Gaurav at 50% and stock worth ₹ 5,000 was taken over by a creditor of ₹ 9,000 in full settlement of his claim.
2. Land and building (book value ₹ 3,00,000) were sold for ₹ 4,00,000 through a broker who charged 2% commission.
3. The remaining creditors were paid ₹ 76,000 in full settlement of their claim and the remaining assets were taken over by Vaibhav for ₹ 17,000.
4. Bank loan of ₹ 3,00,000 was paid along with interest of ₹ 21,000.

Pass necessary journal entries for the above transactions in the books of the firm.

At the time of dissolution of a firm, Creditors are ₹ 70,000; Firm’s Capital is ₹ 1,20,000; Cash Balance is ₹ 10,000. Other assets realised ₹ 1,50,000. Gain/Loss in the realisation account will be:

Charu, Dhwani, Iknoor and Paavni were partners in a firm. They had entered into partnership firm last year only, through a verbal agreement. They contributed Capitals in the firm and to meet other financial requirements, few partners also provided loan to the firm. Within a year, their conflicts arisen due to certain disagreements and they decided to dissolve the firm. The firm had appointed Ms. Kavya, who is a financial advisor and legal consultant, to carry on the dissolution process. In the first instance, Ms. Kavya had transferred various assets and external liabilities to Realisation A/c. Due to her busy schedule; Ms. Kavya has delegated this assignment to you, being an intern in her firm. On the date of dissolution, you have observed the following transactions:

1. Dhwani’s Loan of ₹ 50,000 to the firm was settled by paying ₹ 42,000.
2. Paavni’s Loan of ₹ 40,000 was settled by giving an unrecorded asset of ₹ 45,000.
3. Loan to Charu of ₹ 60,000 was settled by payment to Charu’s brother loan of the same amount.
4. Iknoor’s Loan of ₹ 80,000 to the firm and she took over Machinery of ₹ 60,000 as part payment.

You are required to pass necessary entries for all the above-mentioned transactions.

Distinguish between 'Dissolution of Partnership' and 'Dissolution of Partnership Firm' on the basis of Termination of business.

Total assets of a partnership firm, which was dissolved were ₹ 30,00,000 and its total liabilities were ₹ 6,00,000. Assets were realised at 80% and liabilities were settled at 5% less. If dissolution expenses were ₹ 30,000 the profit or loss on dissolution was ______.

Pass the necessary journal entries for the following transactions on the dissolution of the partnership firm of Tina and Rina after various assets (other than cash) and external liabilities have been transferred to Realisation Account:

1. An unrecorded asset of ₹ 18,000 was taken over by Tina at ₹ 16,000.
2. Rina agreed to pay her brother's loan of ₹ 23,000.
3. Stock of ₹ 30,000 was taken over by a creditor of ₹  40,000 in full settlement.
4. Expenses of dissolution ₹  40,000 were paid by Rina. 
5. Creditors were paid ₹ 18,800 in full settlement of their account of ₹  20,000.
6. Tina's loan of ₹  15,000 was paid through a cheque.

Pass the necessary journal entries for the following transactions on the dissolution of the partnership firm of Tanay and Mehak after various assets (other than cash) and external liabilities have been transferred to Realisation Account:

1. Creditors of ₹ 60,000 accepted stock valued at ₹ 59,000 in full settlement of their claim.
2. Tanay agreed to pay off his wife's loan of ₹ 12,000.
3. The firm had a debit balance of ₹ 18,000 in the profit and loss account on the date of dissolution. 
4. An unrecorded liability of ₹ 20,000 was paid by partner, Mehak, at a discount of 10%.
5. Tanay's loan of ₹ 4,000 was paid through a cheque.
6. Expenses on dissolution amounted to ₹ 11,000 which were paid by Mehak. 

Aditya, Abhinav and Ankit were partners in a firm sharing profits in the ratio of 4: 3 : 3. On 31^st March, 2022, the firm was dissolved. Aditya was appointed to complete the dissolution process for which he was allowed a remuneration of ₹ 42,000. Aditya also agreed to bear dissolution expenses. Actual expenses on dissolution amounted to ₹ 33,000 which were paid by Aditya. Aditya’s Capital Account will be credited by: 

Pass necessary Journal Entries for the following transactions on the dissolution of a partnership firm of Mita and Sonu on 31^st March, 2022 after the various assets other than cash and third party liabilities have been transferred to the Realisation Account.

1. Creditors of ₹ 90,000 took over Land and Building of ₹ 2,00,000 in full settlement of their claim.
2. Sonu took over debtors amounting to ₹ 50,000 at ₹ 40,000.
3. Realisation expenses ₹ 1,800 were paid by Sonu.
4. A machine which was not recorded in the books was taken over by Mita at ₹ 11,000 while its expected market value was ₹ 15,000.
5.  Sortu agreed to pay off his wife's loan of ₹ 20,000.
6. Profit on dissolution amounted at ₹ 50,000.

A, B and C are in partnership business. A used ₹ 2,00,000 belonging to the firm without the information to other partners and made a profit of ₹ 35,000 by using this amount. Which decision should be taken by the firm to rectify this situation?

On the day of dissolution of the firm ‘Roop Brothers’ had partner’s capital amounting to ₹ 1,50,000 external liabilities ₹ 35,000, Cash balance ₹ 8,000 and P & L A/c (Dr.) ₹ 7,000. If Realisation expense and loss on Realisation amounted to ₹ 5,000 and ₹ 25,000 respectively, the amount realised by sale of assets is ______.

Sun and Kiran are partners sharing profits and losses equally. They decided to dissolve their firm. Assets and Liabilities have been transferred to Realisation Account. Pass necessary Journal entries for the following:

1. All partners are agreed that the process of realisation at the time dissolution will be accomplished by Sun for which he will be paid ₹ 10,000 along with the amount of expense which amounted to 2% of total value realised from the Assets on dissolution. Some assets were sold for Cash at a cumulative Value of ₹ 12,00,000 and the remaining were taken over by creditors at a valuation of ₹ 3,00,000.
2. Deferred Advertisement Expenditure A/c appeared in the books at ₹ 28,000.
3. Out of the Stock of ₹ 1,20,000; Kiran (a partner) took over 1/3 of the stock at a discount of 25% and 50% of remaining stock was took over by a Creditor of ₹ 30,000 in full settlement of his claim. Balance amount of stock realized at ₹ 25,000.
4. An outstanding bill for repairs and renewal of ₹ 3,000 was settled through an unrecorded asset which was valued at ₹ 10,000. Balance being settled in Cash.

Read the following hypothetical situation and answer question on the basis of the same.

The average number of months for which interest on drawings will be calculated, will be:

Read the following hypothetical situation and answer question on the basis of the same.

The partnership deed provide that interest on capital will be allowed @10% p.a. The amount of interest on Ishita's capital will be:

The average number of months for which interest on drawings will be calculated, will be:

Prem, Param and Priya were partners in a firm. Their fixed capitals were Prem Rs 2,00,000; Param Rs 3,00,000 and Priya Rs 5,00,000. They were sharing profits in the ratio of their capitals. The firm was engaged in the sale of ready-to-eat food packets at three different locations in the city, each being managed by Prem, Param and Priya. The outlet managed by Prem was doing more business than the outlets managed by Param and Priya. Prem requested Param and Priya for a higher share in the profits of the firm which Param and Priya accepted. It was decided that the new profit sharing ratio will be 2: 1: 2 and its effect will be introduced retrospectively for the last four years. The profits of the last four years were Rs. 2,00,000; Rs. 3,50,000; Rs. 4,75,000 and Rs. 5,25,000 respectively. Showing your calculations clearly, pass a necessary adjustment entry to give effect to the new agreement between Prem, Param and Priya.

Illustrate how interest on drawings will be calculated under various situations.