A, B, and C were partners sharing profits and losses in the proportion of 2 : 2 : 1. Following is their balance sheet as on 31st March, 2013. Balance sheet as on 31st March, 2013 Liabilities Amount (Rs. ) Assets Amount (Rs.) Amount (Rs.) Capital Account Machinery 25,000 A 30,000 Stock 10,000 B 10,000 Debtors 27,500 C 10,000 Less: R.D.D. 1,500 26,000 General Reserve 3,000 Investment 12,000 Creditors 20,000 Profit and Loss A/c 9,000 A’s Loan Account 4,000 Bank 2,000 Bills Payable 7,000 84,000 84,000 On the above date, the partners decide to dissolve the firm.(1) Assets were realised as -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. 12,000Pass the necessary journal entries int he books of the firm.

Journal Entries in the books of the firm. Date Particular LF Amt(Dr.) Amt(Cr.) 1 For transfer of assets to realisation account: Realisation A/c Dr. 74,500 To Machinery A/c 25,000 To Stock A/c 10,000 To Debtors A/c 27,500 To Investment A/c 12,000 2. For transfer of liabilities : Creditors A/c Dr. 20,000 Bills Payable A/c Dr. 7,000 Reserve for Doubtful Debts A/c Dr. 1,500 To Realisation A/c 28,500 3. For Assets sold : Bank A/c Dr. 76,500 To Realisation A/c 76,500 4. For payment of liabilities : Realisation A/c Dr. 27,000 To Bank A/c 27,000 5. For payment of dissolution expenses: Realisation A/c Dr. 1,500 To Bank A/c 1,500 6. For distribution of profit among partners : Realisation A/c Dr. 2,000 To A's Capital A/c 8,00 To B's Capital A/c 8,00 To C's Capital A/c 4,00 7. For payment of loan: A's loan A/c Dr. 4,000 To Bank A/c 4,000 8. For division of General Reserve: General Reserve A/c Dr. 3,000 To A's Capital A/c 1,200 To B's Capital A/c 1,200 To C's Capital A/c 6,00 9. For division of Debit balance of profit and loss: A's Capital A/c Dr. 3,600 B's Capital A/c Dr. 3,600 C's capital A/c Dr. 1,800 To Profit and loss A/c 9,000 10. For payment of capital of partners: A's Capital A/c Dr. 28,400 B's Capital A/c Dr. 8,400 C's Capital A/c Dr. 9,200 To Bank A/c 46,000

A, B, and C were partners sharing profits and losses in the proportion of 2:2:1. Following is their balance sheet as on 31st March, 2013.

Question

A, B, and C were partners sharing profits and losses in the proportion of 2 : 2 : 1. Following is their balance sheet as on 31st March, 2013.

Balance sheet as on 31st March, 2013

Liabilities	Amount (Rs. )	Assets	Amount (Rs.)	Amount (Rs.)
Capital Account		Machinery		25,000
A	30,000	Stock		10,000
B	10,000	Debtors	27,500
C	10,000	Less: R.D.D.	1,500	26,000
General Reserve	3,000	Investment		12,000
Creditors	20,000	Profit and Loss A/c		9,000
A’s Loan Account	4,000	Bank		2,000
Bills Payable	7,000
	84,000			84,000

On the above date, the partners decide to dissolve the firm.(1) Assets were realised as -
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 int he books of the firm.

Journal Entry

Solution

Journal Entries in the books of the firm.

Date	Particular		LF	Amt(Dr.)	Amt(Cr.)
1	For transfer of assets to realisation account:
	Realisation A/c	Dr.		74,500
	To Machinery A/c				25,000
	To Stock A/c				10,000
	To Debtors A/c				27,500
	To Investment A/c				12,000

2.	For transfer of liabilities :
	Creditors A/c	Dr.		20,000
	Bills Payable A/c	Dr.		7,000
	Reserve for Doubtful Debts A/c	Dr.		1,500
	To Realisation A/c				28,500

3.	For Assets sold :
	Bank A/c	Dr.		76,500
	To Realisation A/c				76,500

4.	For payment of liabilities :
	Realisation A/c	Dr.		27,000
	To Bank A/c				27,000

5.	For payment of dissolution expenses:
	Realisation A/c	Dr.		1,500
	To Bank A/c				1,500

6.	For distribution of profit among partners :
	Realisation A/c	Dr.		2,000
	To A's Capital A/c				8,00
	To B's Capital A/c				8,00
	To C's Capital A/c				4,00

7.	For payment of loan:
	A's loan A/c	Dr.		4,000
	To Bank A/c				4,000

8.	For division of General Reserve:
	General Reserve A/c	Dr.		3,000
	To A's Capital A/c				1,200
	To B's Capital A/c				1,200
	To C's Capital A/c				6,00

9.	For division of Debit balance of profit and loss:
	A's Capital A/c	Dr.		3,600
	B's Capital A/c	Dr.		3,600
	C's capital A/c	Dr.		1,800
	To Profit and loss A/c				9,000

10.	For payment of capital of partners:
	A's Capital A/c	Dr.		28,400
	B's Capital A/c	Dr.		8,400
	C's Capital A/c	Dr.		9,200
	To Bank A/c				46,000

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Concept of Dissolution of Partnership Firm

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2015-2016 (March)

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L and M were partners in a firm sharing profits in the ratio of 2:3. On 28-2-2016 the firm was dissolved. After transferring assets (other than cash) and outsiders' liabilities to realization account you are given the following information :

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(b) A second creditor for Rs.30,000 accepted machinery valued at Rs.28,000 in full settlement of his claim.

(c) A third creditor amounting to Rs.70,000 accepted Rs.30,000 in cash and investments of the book value of Rs.45,000 in full settlement of his claim.

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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.

(b) A Second creditor for Rs.50,000 accepted stock at Rs.45,000 in full settlement of his claim.

(c) A third creditor amounting to Rs.90,000 accepted Rs.45,000 in cash and investments worth Rs.43,000 in full settlement of his claim.

(d) Loss on dissolution was Rs.15,000.

Pass necessary journal entries for the above transactions in the books of firm assuming that all payments were made by cheque.

Distinguish between ‘Dissolution of partnership’ and Dissolution of partnership firm ‘on the basis of closure of Books.

Assets and liabilities are transferred to Realisation Account at their ______ value.

Devendra and Ganesh were partners sharing profits and losses in the ratio of 3: 2. They dissolved the partnership firm on 31st March 2013 when their position was as follows:
The assets realised as follows:

Balance Sheet as on 31.03.2013
Liabilities	Amount Rs	Assets	Amount Rs.
Sundry Creditor	12,500	Debtors 56,250
Bank Overdraft	10,000	Less: R.D.D. 6,250	50000
Reserve Fund	15,000	Stock	112500
Capital Accounts:		Furniture	25000
Devendra 1,15,000		Motor Car	37500
Ganesh 75,000		Cash in hand	2500

	227500		227500

(1) Debtors Rs. 45,000, stock Rs. 1,00,000 and goodwill Rs. 12,500

(2) The motor car was taken over by Devendra for Rs. 35,000 and furniture by Ganesh for Rs. 30,000.

(3) The creditors were paid Rs. 11,250 in full settlement.

(4) The realisation expenses were Rs. 5,000.

Pass necessary journal entries in the books of the firm.

Uday and Prabhakar are partners sharing profits and losses in the proportion of 3/5 and 2/5 respectively. They dissolved their partnership firm on 31^st March 2012 when their financial position was as under

Balance Sheet as on 31st March 2012
Liabilities	Amount (Rs)	Assets	Amount (Rs)
Sundry Creditors	15,000	Cash at bank	3,000
Uday’s Wife’s Loan	30,000	Debtors 67,500
Capital A/c		(–) R.D.D. 7,500	60,000
Uday	1,38,000	Stock	135000
Prabhakar	90,000	Machinery	45000
		Furniture	30000
	2,73,000		2,73,000

The assets were realised as under:
Goodwill Rs. 15,000, Stock Rs. 1,20,000 and Debtors Rs. 54,000.
Machinery was taken over by Prabhakar at Rs. 40,000 and furniture by Uday at book value.
Uday agreed to discharge his wife’s loan.
The creditors were paid at a rebate of Rs. 3,000
The expenses of dissolution amounted to Rs. 6,000
Pass necessary Journal Entries in the books of the firm.

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 :
(i) Interest on capital @ 5% p.a.
(ii) Interest on drawing @ 12% p.a.
(iii) Interest on partners' loan @ 6% p.a.
(iv) Moli was allowed an annual salary of Rs 4,000; Bhola was allowed a commission of 10% of net profit as shown by Profit and Loss Account and Raj was guaranteed a profit of Rs 1,50,000 after making all the adjustments as provided in the partnership agreement.
Their fixed capitals were Moli : Rs 5,00,000; Bhola : Rs 8,00,000 and Raj : Rs 4,00,000. On 1^st April, 2016 Bhola extended a loan of Rs 1,00,000 to the firm. The net profit of the firm for the year ended 31^st March, 2017 before interest on Bhola's loan was Rs 3,06,000.
Prepare Profit and Loss Appropriation Account of Moli, Bhola and Raj for the year ended 31^st March, 2017 and their Current Accounts assuming that Bhola withdrew Rs 5,000 at the end of each month, Moli withdrew Rs 10,000 at the end of each quarter and Raj withdrew Rs 40,000 at the end of each half year.

Aniket Ltd issued 40,000 equity shares of ` 100 each payable as follows :

On application Rs 20
On allotment Rs 30
On first call Rs 30
On second call Rs 20

The company received applications for 50,000 equity shares. Allotment of shares was made on pro-rata basis. Excess application money were adjusted to allotment. Share allotment and calls were made and also received, except Mr. Sanish who was holding 1,000 shares failed to pay both the calls. His shares were forfeited after the second call.
Record the above transactions in the books of Aniket Ltd

Give the word/term/phrase which can substitute the following statement.

Winding up of partnership business.

Answer in one sentence only.

In what proportion is the balance on Realisation Account transferred to Partners’ Capital / Current Accounts?

Answer in one sentence only.

Who should bear the capital deficiency of an insolvent partner?

Answer in one sentence only.

Which account is debited on repayment of Partner’s Loan?

Write the word / term / phrase, which can substitute the following statements.
An account opened to find out the Profit or Loss on Sale of Assets and Settlement of Liabilities.

Write the word / term / phrase, which can substitute the following statement.
Conversion of assets into cash on dissolution of firm.

State whether the following statements is True or False.

The firm is dissolved automatically on the retirement of a partner.

State whether the following statement is True or False.

On dissolution Bank Overdraft is transferred to Realisation Account.

State whether the following statement is True or False with reason.

Dissolution takes place when the relation among the partners comes to an end.

Select the most appropriate alternative from those given below :

Partnership is compulsorily dissolved when the partners of the firm become ____________

Anil and Sunil were partners sharing profits and losses in the ratio of 3: 2. Their Balance Sheet as on 31st March, 2009.

Balance Sheet as on 31^st 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.

X, Y and Z were carrying on business. They share profits and losses in the ratio of 5:3:2 respectively. Their Balance Sheet as on 31^st March, 2010 was as under:

Balance Sheet as on 31^st March, 2010

Liabilities	Amount (Rs)	Assets		Amount (Rs)
Sundry Creditors	21000	Plant and Machinery		20000
Y’s loan	5000	Investment		8000
Reserve fund	20000	Stock
Capital Account:		Debtors	18000	17000
X	20000	Less : R.D.D	1000	17000
Y	10000	Cash in hand		2000
Z	4000	Cash at Bank		3000
	80000			80000

On the above date the firm was dissolved and the assets realised as under:

1) Investment Rs 5,000, Stock Rs 24,000 and Debtors Rs 15,000.

2) The Plant and Machinery was taken over by Mr. ‘X’ at book value.

3) Sundry Creditors and Mr. ‘Y’ loan were paid in full.

4) Realisation expenses incurred Rs 1,000.

Prepare Realisation Account, Partner’s Capital Account and Bank Account

(When all partners become insolvent)

Shiv, Sadashiv and Sadanand are Partners in a firm sharing Profit and Losses equally whose Balance-sheet as on 31^st December, 2011 stood as follows:

Balance Sheet as on 31^st December, 2011

Liabilities	Amount (Rs)	Assets	Amount (Rs)
Capital Accounts		Sadanand’s Capital A/c	2000
Shiv	6000	Buildings	18300
Sadashiv	4000	Machinery	12700
Parvati’s Loan	10000	Debtors	9100
Sundry Creditors	30000	Bank	7900
	50000		50000

Shiv, Sadashiv and Sadanand were declared bankrupt and hence the firm was dissolved as on that date:

(i) The sundry Assets realised as follows:

Building Rs 10,900, Machinery Rs 8,200, Debtors Rs 6,800.

(ii) Realisation expenses amounted to Rs 1,300.

(iii) Sadanand was unable to contribute anything-

Whereas Rs 1,100 and Rs 900 were recovered from the realisation of private estate of Shiv and Sadashiv respectively.

You are required to close the books of the firm.

Ganga, Yamuna and Godavari are in Partnership sharing profits and losses equally. Their Balance sheet as on 31^st December, 2011 was as follows:

Balance Sheet as on 31^st 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.

Distinguish between firm’s debts and partner’s private debts.

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.

Jay , Ajay and Vijay were partners sharing profits and losses in the proportion of 2 : 2 : 1 . Following is their balance sheet as on 31.03.2013.

Balance sheet as on 31st March 2013

Liabilities	Amount (₹)	Assets		Amount (₹)
Capital A/c		Machinery		50000
Jay	60000	Stock		20000
Ajay	20000	Debtors	55000	52000
Vijay	20000	Less : R.D.D.	(3000)	52000
General Reserve	6000	Investments		24000
Creditors	40000	Profit and loss A/c		18000
Jay's Loan A/c	8000	Bank		4000
Bills Payable	14000
	168000			168000

On the above date the partners decided to dissolve the firm.

(1) Assets were realised as :

Machinery ₹45000 ; Stock ₹ 18000;

Investment ₹ 21000 ; Debtors ₹ 45000

(2) Dissolution expenses were ₹ 3000.

(3) Goodwill of the firm realised ₹ 24000.

Prepare : (1) Realisation Account (2) Partner's Capital Account (3) Bank Account.

Give the word/term/phrase which can substitute the following statement.

Credit balance of realisation Account.

State whether the following statement is True or False with reason.

At the time of dissolution, a loan from the partner will be transferred to Realisation Account.

Vinod, Vijay, and Vishal are partners in a firm, sharing profit & Losses in the ratio 3:2:1. Vishal becomes insolvent and his capital deficiency is ₹ 6,000. Distribute the capital deficiency among the solvent partners.

Creditors ₹ 30,000, Bills Payable ₹ 20,000 and Bank Loan ₹ 10,000. Available Bank Balance ₹ 40,000 what will be the amount that creditors will get in case of all partner's insolvency.

Insolvent partners capital A/c Debit side is ₹ 15,000 & insolvent partner brought cash ₹ 6,000. Calculate the amount of Insolvency Loss to be distributed among the solvent partners.

Realisation profit of a firm is ₹ 6,000, partners share Profit & Loss in the ratio of 3: 2: 1. Calculate the amount of Realisation Profit to be credited to Partners Capital A/c.

Complete the table.

1)	Debit side total of Realisaton A/c	Credit side total of Realisation A/c	Loss on Realisations
1)	₹ 20,000	?	₹ 4,000
2)	Creditors	Bills Payable	Third-Party Liabilities
2)	₹16,000	₹12,000	?
3)	Credit side total Profit ion of Realisaton A/c	Debit side total of Realisation A/c	Profit of realisation
3)	₹ 21,000	₹16,000	?
4)	Debit side total of Capital A/c	Credit side total of Capital A/c	Cash brought by partner
4)	₹ 51,000	?	₹ 17,000
5)	capital deficiency	Cash brought by Insolvent Partner	Insolvent loss
5)	?	₹ 7,000	₹ 21,000

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 31^st 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.’

On which of the following grounds the court may order a partnership firm to be dissolved?

Name the account opened to find out the Profit or Loss on Sale of Assets and Settlement of Liabilities?

The account which is prepared on dissolution of a partnership firm:

On dissolution of a firm, a liability taken over by a partner is credited to ______.

At the time of dissolution, all assets are transferred to Realisation Account at their ______.

Which of the following does not result into reconstitution of a partnership firm?

Asha, Usha and Nisha are partners in the firm sharing profits and losses in the ratio of 3 : 2 : 1 respectively. On 31st March, 2019 they decided to dissolve the firm when their Balance Sheet was as under:

Balance Sheet as on 31st March, 2019
Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	28,800	Building	1,02,000
Bills Payable	21,600	Machinery	73,000
Capitol Accounts:		Motor Car	1,67,600
Asha	2,27,160	Goodwill	45,600
Usha	1,44,000	Investment	62,400
Nisha	1,08,000	Debtors	30,600
		Stock	45,000
		Bank	3,360
	5,29,560		5,29,560

The firm was dissolved on the above date and the assets realised as under:

Asha agreed to take over the Building at ₹ 1,23,600
Usha took over Goodwill Stock and Debtors at book value and agreed to pay Creditors and Bills payable.
Motor car and Machinery realised at ₹ 1,51,080 and ₹ 31,680 respectively.
Investment were taken by Nisha at an agreed value of ₹ 55,440.
Realisation Expenses amounted to ₹ 6,800.

Prepare:

Realisation Account
Partners' Capital Account
Bank Account

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	46,000
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.

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:

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 ______.

Do you agree or disagree with the following statement:

On dissolution, cash/bank account is closed automatically.

Following is the Balance sheet of Ram, Shyam and Murari as on 31st March, 2023.

Liabilities	Amount (₹)	Assets	Amount (₹)
Capital		Furniture	10,800
Ram	18,000	Debtors	72,000
Shyam	10,800	Stocks	86,400
Creditors	1,44,000	Cash	3,600
Ram's Loan	36,000	3,600	36,000
	2,08,800		2,08,800

Due to the inability to pay the creditors, the firm is dissolved, Shyam and Murari cannot pay anything. Ram can contribute only ₹ 5,400 from his private estate. Stock realised ₹ 54,000. Debtors realised ₹ 57,600 and Furniture is sold for ₹ 3,600. Realisation Expenses amounted to ₹ 10,800.
Prepare necessary Ledger account to close the books of the firm.

Insolvent partner Capital A/c debit side total is ₹ 25,000 and credit side total is ₹ 10,000. Calculate deficiency.

Mention the liability of a partnership firm which is not shown in its balance sheet but is paid off at the time of the dissolution of the firm.

A, B, and C were partners sharing profits and losses in the proportion of 2:2:1. Following is their balance sheet as on 31st March, 2013.

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