Question

A, B and C were partners sharing profits and losses in the ratio of 2 : 2 : 1. Their Balance Sheet as at 31st March, 2026 was as follows:

Liabilities	₹	₹	Assets	₹	₹
Sundry Creditors		2,00,000	Cash at Bank		3,00,000
Capitals:		13,00,000	Sundry Debtors	1,95,000	1,90,000
A	7,50,000		Less: Provision for Bad Debts	5,000
B	3,00,000		Stock		3,00,000
C	2,50,000		Fixed Assets		7,10,000
		15,00,000			15,00,000

On the above date, they dissolved the firm and following amounts were realised:

Fixed Assets ₹ 6,75,000; Stock ₹ 3,39,000; Debtors ₹ 1,35,000; Creditors were paid ₹ 1,85,000 in full settlement of their claim. Expenses on realisation amounted to ₹ 19,000.

Pass the necessary Journal entries on the dissolution of the firm.

Answer 1

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Realisation A/c   ...Dr		12,05,000	-
	To Sundry Debtors A/c		-	1,95,000
	To Stock A/c		-	3,00,000
	To Fixed Assets A/c		-	7,10,000
	(Being the book value of assets transferred to the Realisation Account)
2.	Sundry Creditors A/c   ...Dr.		2,00,000	-
	Provision for Bad Debts A/c   ...Dr.		5,000	-
	To Realisation A/c		-	2,05,000
	(Being liabilities and provision transferred to Realisation Account)
3.	Bank A/c   ...Dr.		11,49,000	-
	To Realisation A/c		-	11,49,000
	(Being cash received from the sale/realisation of assets)
4.	Realisation A/c   ...Dr.		2,04,000	-
	To Bank A/c		-	2,04,000
	(Being payment made for creditors and realisation expenses)
5.	A’s Capital A/c ...Dr.		22,000	-
	B’s Capital A/c ...Dr.		22,000	-
	C’s Capital A/c   ...Dr.		11,000	-
	To Realisation A/c		-	55,000
	(Being loss on realisation transferred to Partners’ Capital Accounts in their profit-sharing ratio of 2 : 2 : 1)
6.	A’s Capital A/c   ...Dr.		7,28,000	-
	B’s Capital A/c   ...Dr.		2,78,000	-
	C’s Capital A/c   ...Dr.		2,39,000	-
	To Bank A/c		-	12,45,000
	(Being final cash payments made to partners to settle their capital accounts)