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Question
Complete the table.
| 1) | Debit side total of Realisaton A/c | Credit side total of Realisation A/c | Loss on Realisations |
| ₹ 20,000 | ? | ₹ 4,000 | |
| 2) | Creditors | Bills Payable | Third-Party Liabilities |
| ₹16,000 | ₹12,000 | ? | |
| 3) | Credit side total Profit ion of Realisaton A/c | Debit side total of Realisation A/c | Profit of realisation |
| ₹ 21,000 | ₹16,000 | ? | |
| 4) | Debit side total of Capital A/c | Credit side total of Capital A/c | Cash brought by partner |
| ₹ 51,000 | ? | ₹ 17,000 | |
| 5) | capital deficiency | Cash brought by Insolvent Partner | Insolvent loss |
| ? | ₹ 7,000 | ₹ 21,000 |
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Solution
| 1) | Debit side total of Realisaton A/c | Credit side total of Realisation A/c | Loss on Realisations |
| ₹ 20,000 | ₹16,000 | ₹ 4,000 | |
| 2) | Creditors | Bills Payable | Third-Party Liabilities |
| ₹16,000 | ₹12,000 | ₹ 28,000 | |
| 3) | Credit side total Profit ion of Realisaton A/c | Debit side total of Realisation A/c | Profit of realisation |
| ₹ 21,000 | ₹16,000 | ₹ 5,000 | |
| 4) | Debit side total of Capital A/c | Credit side total of Capital A/c | Cash brought by partner |
| ₹ 51,000 | ₹ 34,000 | ₹ 17,000 | |
| 5) | capital deficiency | Cash brought by Insolvent Partner | Insolvent loss |
| ₹ 28,000 | ₹ 7,000 | ₹ 21,000 |
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RELATED QUESTIONS
If an asset is taken over by partner from firm his capital account will be ___________.
Lal and Pal were partners in a firm sharing profits in the ratio of 3: 7. On 1.4.2015 their firm was dissolved. After transferring assets (other than cash) and outsider's liabilities to realisation account, you are given the following information:
(a) A creditor of Rs.3,60,000 accepted machinery valued at Rs.5,00,000 and paid to the firm Rs.1,40,000.
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| Liabilities | Rs | Assets | Rs |
|
Creditors Investment Fluctuation Fund Capitals Prachi Ritika |
2,00,000 30,000 30,000 40,000 |
Furniture Stock Investments Cash Ishita's Capital
|
37,000 5,500 15,000 9,000 18,000
|
| 84,500 | 84,500 |
Moli, Bhola and Raj were partners in a firm sharing profits and losses in the ratio of 3 : 3 : 4. Their partnership deed provided for the following :
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(iii) Interest on partners' loan @ 6% p.a.
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Answer in one sentence only.
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| Balance Sheet as on 31st March, 2009 | |||
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
| Capital Account: | Bank | 30,000 | |
| Anil | 50,000 | Stock | 25,000 |
| Sunil | 30,000 | Debtors | 70,000 |
| Current Account: | Plant | 45,000 | |
| Anil | 15,000 | Building | 35,000 |
| Sunil | 10,000 | ||
| Creditors | 87,000 | ||
| Bills payable | 13,000 | ||
| 2,05,000 | 2,05,000 | ||
The firm was dissolved on the above date and the assets realised as under:
1) Stock Rs 20,000, Debtors Rs 60,000, Plant Rs 40,000 and Building Rs 30,000.
2) Anil agreed to pay off the bills payable.
3) Creditors were paid in full.
4) Dissolution expenses were Rs 7,000.
Prepare:
(i) Realisation Account
(ii) Bank Account
(iii) Current Account and Capital Account of the partners.
Pannalal, Babulal and Hiralal were partners sharing profits and losses in the proportion of 2:2:1, following is their Balance Sheet as on 31st March, 2008.
Balance Sheet as on 31st March, 2008
| Liabilities | Amount (Rs) | Assets | Amount (Rs) | |
| Capital Accounts: | Machinery | 25000 | ||
| Pannalal | 30000 | Stock | 10000 | |
| Babulal | 10000 | Debtors | 27500 | 26000 |
| Hiralal | 10000 | Less : R.D.D | 1500 | |
| General Reserve | 3000 |
Investment |
12000 | |
| Creditors | 20000 | Profit and Loss A/c | 9000 | |
| Pannalal’s Loan A/c | 4000 | Bank | 2000 | |
| Bills payable | 7000 | |||
| 84000 | 84000 | |||
On the above date the partners decided to dissolve the firm:
1) Assets were realised: Machinery Rs 22,500, Stock Rs 9,000, Investment Rs 10,500, Debtors Rs 22,500.
2) Dissolution expenses were Rs 1,500.
3) Goodwill of the firm realised Rs 12,000
Pass the necessary Journal entries in the books of the firm.
Mahesh, Suresh and Jayesh were partners of the firm. They decided to dissolve the firm on 31st March, 2012. Their Balance Sheet as on that date was as under:
Balance Sheet as on 31st March, 2012
| Liabilities | Amount (Rs) | Assets | Amount (Rs) | |
| Creditors | 18000 | Cash at Bank | 9600 | |
| Loan | 4500 | Sundry Assets | 51000 | |
| Capitals | Debtors | 72600 | 69000 | |
| Mahesh | 82500 | Less : R.D.D. | 3600 | |
| Suresh | 30000 | Stock | 23400 | |
| Jayesh | 21000 | Furniture | 3000 | |
| 156000 | 156000 | |||
The firm was dissolved as follows:
1) Mahesh will accept furniture for Rs 2,000 and agreed accept the debtors of book value of Rs 60,000 at on agreed value of Rs 51,000.
2) Suresh will accept stock at an agreed value Rs 20,000, and Sundry Assets of Book value Rs 24,000 at Rs 23,500.
3) Jayesh will accept remaining Sundry Assets for Rs 25,000 He will further accept the liability of loan along with due interest at 12% p.a.
Interest for three months on this loan was outstanding and was not recorded in the books.
4) Expenses of dissolution were Rs 1,000 and outstanding expenses of Rs 1,200 were to be paid from the firm.
5) The remaining debtors were realised Rs 7,000.
Prepare:
1) Realisation A/c
2) Partner’s Capital A/c
3) Bank A/c
Gautam, Viral and Ashwin were Partners sharing profits and losses equally. Their Balance sheet as on 31st December, 2011 was as follows:
Balance Sheet as on 31st December, 2011
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
| Capital Accounts: | Building | 73,900 | |
| Gautam | 75000 | Furniture | 44,100 |
| Virat | 45000 | Stock | 25,400 |
| Reserve Fund | 27,000 |
Debtors |
33,600 |
| Creditors | 48,500 | Cash | 15,000 |
| Bank Loan | 11,500 | Ashwin’s Capital | 15,000 |
| 207000 | 207000 |
The firm was dissolved due to insolvency of Ashwin and the following was the result.
(i) The realisation of Assets were as follows:
a) The stock was completely damaged and could realise worth Rs 16,500 only.
b) Building was sold for Rs 49,800.
c) Furniture was realised by the firm at Rs 23,100 less than the book value.
d) A Customer who owes Rs 14,400 became insolvent and nothing could be recovered from his private estate.
(ii) Creditors were paid for Rs 36,900 in full settlement and Bank Loan was discharged fully.
(iii) The expenses of realisation Rs 4,100
(iv) Ashwin became insolvent and the firm could recover only Rs 4,000 from his private estate.
Prepare Realisation A/c, Partner’s Capital A/c and cash A/c to close the books of the firm.
Ganga, Yamuna and Godavari are in Partnership sharing profits and losses equally. Their Balance sheet as on 31st December, 2011 was as follows:
Balance Sheet as on 31st December, 2011
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
| Capital Accounts | Currnet Accounts | ||
| Ganga | 25000 | Yamuna | 20000 |
| Yamuna | 10000 | Godavari | 4000 |
| Godavari | 5000 | Premises | 17200 |
| Ganga’s Currnet A/c | 3000 | Machinery | 10800 |
| Sundry Creditors | 4000 | Debtors | 9600 |
| Bank loan | 3000 | Cash | 6400 |
| 50000 | 50000 |
Godavari was declared insolvent and hence the firm was dissolved as on that date. Premises was sold at Rs 14,800, Machinery realised Rs 6,400. Bad debts and discount allowed to Debtors amounted to Rs 1,600. Sundry creditors agreed to receive 80 paise in a rupee (Rs) in full satisfaction of their claim. Bank Loan was settled at 60% of book value. During the course of dissolution a liability under an action for damages was settled for Rs 1,400 against Rs 2,100 provided in the books of the firm. The expenses of realisation amounted to Rs 900. Goodwill contributed Rs 1,900 from her private Property.
Prepare necessary ledger accounts in the books of the firm.
State the difference between dissolution of partnership and dissolution of partnership firm.
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.
Ram, Laxman and Bharat were partners sharing profit and losses in the ratio of 2 : 2 : 1. Following is the Balance Sheet as on 31st March, 2016 :
Balance Sheet as on 31st March, 2016
| Liabilities | Amount (Rs.) |
Assets | Amount (Rs.) |
| Capital A/c : | Machinery | 2,00,000 | |
| Ram | 2,40,000 | Stock | 80,000 |
| Laxman | 80,000 | Debtors 2,20,000 | |
| Bharat | 80,000 | Less : R.D.D. (12,000) | 2,08,000 |
| General Reserve | 24,000 | Investment | 96,000 |
| Creditors | 1,92,000 | Profit and Loss A/c | 72,000 |
| Bills Payable | 56,000 | Bank balance | 16,000 |
| 6,72,000 | 6,72,000 |
On the above date the partners decided to dissolve the firm:
(1) Assets were realised as under -
| Machinery | Rs. 1,80,000 |
| Stock | Rs. 72,000 |
| Investments | Rs. 84,000 |
| Debtors | Rs. 1,80,000 |
(2) Dissolution expenses were Rs. 12,000.
(3) Goodwill of the firm realised 96,000
Prepare :
(1) Realisation Account
(2) Partner's Capital Account
(3) Bank Account
State whether the following statement is ‘True’ or ‘False’
On dissolution, cash or bank account is closed automatically.
Rahul, Rohit and Ramesh were partners in a firm sharing profits and losses in the ratio of 2:2:1 respectively. The Balance Sheet as on 31.03.2013 was as follows :
Balance Sheet as on 31st Mar, 2013
| Liabilities |
Amount
(Rs.)
|
Assets |
Amount
(Rs.)
|
Amount
(Rs.)
|
| Sundry Creditors | 20,000 | Cash at Bank | 8000 | |
| Bills Payable | 5,000 |
Debtors
|
16000 | |
| General Reserve | 6,000 | Less : R.D.D. | (1000) | 15,000 |
| Rahul’s Loan A/c | 16,000 | Stock | 20,000 | |
| Capital Account | Plant and Machinery | 30,000 | ||
| Rahul | 25,000 | Furniture | 6,000 | |
| Rohit | 10,000 | Ramesh’s Capital Account | 3,000 | |
| 82000 | 82000 |
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 31st 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:
- 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.
- Land and building (book value ₹ 3,00,000) were sold for ₹ 4,00,000 through a broker who charged 2% commission.
- 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.
- 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.
Partnership is completely dissolved when the partners of the firm become _________.
Realisation account is __________ on realisation of assets.
Give the word/term/phrase which can substitute the following statement.
An account opened to find out the Profit or Loss on realisation of Assets and settlement of Liabilities.
Give the word/term/phrase which can substitute the following statement.
Credit balance of realisation Account.
Write the word/phrase/term/ which can substitute the following statement.
Expenses incurred on dissolution of firm.
State whether the following statement is True or False with reason.
At the time of the dissolution of partnership, all assets should be transferred to Realisation Account.
Leela, Manda, and Kunda are partners in the firm ‘Janki Stores’ sharing Profits and Losses in the ratio of 3:2:1 respectively. On 31st March 2018, they decided to dissolve the firm when their Balance Sheet was as under.
| Balance Sheets as on 31st March 2018. | |||
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Creditors | 28,800 | Building | 1,02,000 |
| Bills Payable | 21,600 | Machinery | 73,000 |
| Capital A/c’s | Motor Car | 1,67,600 | |
| Leela | 2,27,160 | Goodwill | 45,600 |
| Manda | 1,44,000 | Investment | 62,400 |
| Kunda | 1,08,000 | Debtors | 30,600 |
| Stock | 45,000 | ||
| Bank | 3,360 | ||
| 5,29,560 | 5,29,560 | ||
Leela agreed to take over the Building at ₹ 1,23,600. Manda took over Goodwill, Stock, and Debtors at Book values and agreed to pay Creditors and Bills payable. Motor Car and Machinery realised ₹ 1,51,080 and ₹ 31,680 respectively. Investments were taken by Kunda at an agreed value of ₹ 55,440. Realisation expenses amounted to ₹ 6,800.
Pass necessary entries in the books of ‘Janki Stores.’
Sangeeta, Anita, and Smita were in partnership sharing Profits and Losses in the ratio 2: 2: 1. Their Balance Sheet as on 31st March 2019 was as under:
| Balance Sheets as on 31st March, 2019 | |||
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Capital: | Land | 2,10,000 | |
| Sangeeta | 60,000 | Plant | 20,000 |
| Anita | 40,000 | Goodwill | 15,000 |
| Smita | 30,000 | Debtors | 1,25,000 |
| Sangeeta’s Loan A/c | 1,20,000 | Loans and Advances | 15,000 |
| Sundry Creditors | 1,20,000 | Bank | 5,000 |
| Bills Payable | 20,000 | ||
| 3,90,000 | 3,90,000 | ||
They decided to dissolve the firm as follows:
1. Assets realised as; Land recovered ₹ 1,80,000; Goodwill for ₹ 75,000; Loans and Advances realised ₹ 12,000; 10% of the Debts proved bad;
2. Sangeeta took Plant at book value.
3. Creditors and Bills payable paid at 5% discount.
4. Sangeeta’s Loan was discharged along with ₹ 6,000 as Interest.
5. There was a contingent liability in respect of bills of ₹ 1,00,000 which was under discount. Out of them, a holder of one bill of ₹ 20,000 became insolvent
Show Realisation Account, Partners Capital Account, and Bank Account.
A firm is dissolved with the consent of all the partners or in accordance with a contract between the partners is known as ______
Write the word/term/phrase, which can substitute each of the following statements.
"Liability likely to arise in future on happening of certain events".
At the time of dissolution, all assets are transferred to Realisation Account at their ______.
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:
- Dhwani’s Loan of ₹ 50,000 to the firm was settled by paying ₹ 42,000.
- Paavni’s Loan of ₹ 40,000 was settled by giving an unrecorded asset of ₹ 45,000.
- Loan to Charu of ₹ 60,000 was settled by payment to Charu’s brother loan of the same amount.
- 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.
Hints:
- Dr. Dhwani’s Loan A/c by ₹ 50,000; Cr. Bank A/c by ₹ 42,000 and Realisation A/c by ₹ 8,000.
- Dr. Paavni’s Loan A/c and Cr. Realisation A/c by ₹ 40,000.
- Dr. Realisation A/c and Cr. Loan to Charu A/c by ₹ 60,000.
- Dr. Iknoor Loan A/c by ₹ 80,000; Cr. Realisation A/c by ₹ 60,000 and Bank A/c by ₹ 20,000.
A firm consisting of partners Mukund, Sachin and Yuvraj decided to dissolve the partnership They decided to take over certain assets and liabilities and continue the business separately. The Balance Sheet was as under.
| Balance Sheet as on 31st March, 2020 | |||||
| Liabilities | Amount (₹) |
Assets | Amount (₹) |
||
| Capital A/c: | Furniture | 2,000 | |||
| Mukund | 55,000 | 89,000 | Sundry Assets | 34,000 | |
| Sachin | 20,000 | Debtors | 48,400 | 46,000 | |
| Yuvraj | 14,000 | Less: RDD | 2,400 | ||
| Creditors | 12,000 | Stock | 15,600 | ||
| Loan | 3,000 | Cash | 6,400 | ||
| 1,04,000 | 1,04000 | ||||
It was agreed as under:
- Mukund is to take Furniture at ₹ 1,600 and the Debtors amounting to ₹ 40,000 at ₹ 34,400 only. He accepted the Creditors on ₹ 12,000 at that figure.
- Sachin is to take over all Stock at ₹ 14,000 and Sundry Assets worth ₹ 16,000 at ₹ 14,400 only.
- Yuvraj is to take over the remaining Sundry Assets at ₹ 16,000 and assume the responsibility for the discharge of the loan together will accrued interest on a loan of ₹ 60. which has not been recorded in accounts.
- The dissolution expenses were ₹ 540.
- The remaining debtors realised only ₹ 4,200.
- The necessary adjustments were made by partners to settle their accounts.
Prepare Realisation Account, Partners Capital Account, and Cash Account, after giving effect to the above adjustments.
Complete the table.
| Debit side total of Realisation A/c |
Credit side total of Realisation A/c |
Loss on Realisation |
| ₹ 20,000 | ? | ₹ 4,000 |
Dino, Manu and Ramu are Partners Sharing Profits and Losses in the Ratio 2 : 2 : 1. They decided to dissolved the firm on 31st March, 2020. When their position was as under.
| Balance Sheet as on 31st March, 2020 | ||||
| Liabilities | Amount (₹) |
Assets | Amount (₹) |
|
| Capital A/c: | Building | 78,000 | ||
| Dino | 26,000 | 66,000 | Computer | 45,000 |
| Manu | 22,000 | Debtors | 20,000 | |
| Ramu | 18,000 | Goodwill | 35,000 | |
| Creditors | 80,000 | Bank | 8,000 | |
| Bill Payable | 40,000 | |||
| 1,86,000 | 1,86,000 | |||
The firm was dissolved on above date and the following is the result of realisation.
- The Assets were realised as Building ₹ 40,000, Computer ₹ 30,000, Debtors ₹ 10,000.
- Realisation expenses amounted to ₹ 2,000.
- All partners were insolvent The following amount was recovered from them Dino ₹ 2,000 and Manu ₹ 2,000.
Prepare Necessary ledger account to close the books of the firm.
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 ______.
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:
- 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.
- Deferred Advertisement Expenditure A/c appeared in the books at ₹ 28,000.
- 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.
- 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.
Do you agree or disagree with the following statement:
On dissolution, cash/bank account is closed automatically.
Amul and Sumul were partners sharing profits and losses in the ratio of 3 : 2. Their Balance Sheet as on 31st March, 2023 was as follows:
| Balance Sheet as on 31st March, 2023 | |||
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Capital Accounts : | Building | 10,500 | |
| Amul | 15,000 | Plant | 13,500 |
| Sumul | 9,000 | Debtors | 21,000 |
| Current Accounts: | Stock | 7,500 | |
| Amul | 4,500 | Bank | 9,000 |
| Sumul | 3,000 | ||
| Creditors | 26,100 | ||
| Bills Payable | 3,900 | ||
| 61,500 | 61,500 | ||
The firm was dissolved on the above date and the assets realised as under:
(1) Plant ₹ 12,000, Building ₹ 9,000, Stock ₹ 6,000, and Debtors ₹ 18,000.
(2) Amul agreed to pay off the Bills Payable.
(3) Creditors were paid in full.
(4) Dissolution expenses were ₹ 2,100.
Prepare: Realisation A/c, Partners' Current A/cs, Partners' Capital A/cs and Bank A/c.
______ means winding-up of partnership firm.
Assertion: A revaluation account is prepared at the time of dissolution of a partnership.
Reason: A revaluation account is prepared to determine the net gain/loss on realisation of assets and settlement of liabilities.
Which one of the following is correct?
