Question

A, B and C sharing profits in the proportion of 3 : 2 : 1 agreed upon dissolution of their partnership firm on 31st March, 2024 at which date their balance sheet was as under:

Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capital A/cs:		60,000	Machinery		40,500
A	40,000		Stock-in-Trade		7,550
B	20,000		Investments		20,000
Mrs. A’s Loan		10,000	Accrued Income		830
Creditors		18,500	Debtors	9,300	8,700
Investments Fluctuation Fund		6,000	Less: Provision for Doubtful Debts	600
			Current A/c - ‘C’		11,500
			Cash at Bank		5,420
		94,500			94,500

The investments are taken over by A for ₹ 17,500. A agrees to discharge his wife’s loan. B takes over all the Stock at ₹ 7,000 and debtors amounting to ₹ 5,000 at ₹ 4,000. Machinery is sold for ₹ 67,000. The remaining debtors realise 50% of book value. The expenses of realisation amount to ₹ 600.

It is found that an investment not recorded in the books is worth ₹ 3,000 and it is taken over by one of the creditors at this value. Accrued Income could not be realised.

Show the necessary ledger accounts on completion of the dissolution of firm.

Hints: C’s Current A/c appears on the assets side, which means that it has a debit balance. As such, it will be transferred to the Debit side of C’s Capital Account.

Answer 1

Dr.	Realisation A/c				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Machinery A/c		40,500	By Provision for Doubtful Debts A/c		600
To Stock-in-Trade A/c		7,550	By Mrs. A’s Loan A/c		10,000
To Investments A/c		20,000	By Creditors A/c		18,500
To Accrued Income A/c		830	By Investments Fluctuation Fund A/c		6,000
To Debtors A/c		9,300	By Bank A/c (Assets realised):		69,150
To A’s Capital A/c (Mrs. A’s Loan taken over)		10,000	Machinery	67,000
To Bank A/c (Liabilities paid off):		16,100	Debtors	2,150
Creditors	15,500		By A’s Capital A/c (Investments taken over)		17,500
Expenses of realisation	600		By B’s Capital A/c (Stock and a part of Debtors taken over)		11,000
To Profit on Realisation t/f to Capital A/c:		28,470
A	14,235
B	9,490
C	4,745
		1,32,750			1,32,750

 

Dr.	Partner’s Capital A/c						Cr.
Particulars	A	B	C	Particulars	A	B	C
To Current A/c	-	-	11,500	By Balance b/d	40,000	20,000	-
To Realisation A/c (Assets taken over)	17,500	11,000	-	By Realisation A/c (Wife loan taken over)	10,000	-	-
To Bank A/c (Final Payment)	46,735	18,490		By Realisation A/c (Profit)	14,235	9,490	4,745
				By Bank A/c	-	-	6,755
	64,235	29,490	11,500		64,235	29,490	11,500

 

Dr.	Bank A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	5,420	By Realisation A/c (Creditors)	15,500
To Realisation A/c (Assets realised)	69,150	By Realisation A/c (Expenses of realisation)	600
To C’s Capital A/c	6,755	By A’s Capital A/c	46,735
		By B’s Capital A/c	18,490
	81,325		81,325