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Solution - Dissolution of Partnership Firm

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Question

Mr. Aaba and Mr. Baba are equal partners whose Balance Sheet as on 31 st March, 2012 was as under:

                                                               Balance Sheet as on

                                                                  31st March, 2012

LiabilitiesAmount(Rs.)AssetsAmount(Rs.)
Sundry Creditors16000Cash in hand500

Capital A/c

              Aaba

              Baba

 

2000

2000

Stock4500
  Debtors4000
  Plant and machinery5000
  Furniture2000
  Land and Building4000
 20000 20000

 

Due to weak financial position of the partners the firm is dissolved.

Aaba and Baba are not able to contribute anything from their private estate, hence they are declared insolvent.

The assets are realised as follows :-

Stock Rs. 3,000, Plant and Machinery Rs. 3,000, Furniture Rs. 1,000, Land and Building Rs. 2,000 and Debtors Rs. 1,000 only.

Realisation expenses amounted to Rs. 500.

You are required to prepare necessary Ledger Accounts to close the books of the firm.

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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
 
25000
A
30000
Stock
 
10000
B
10000
Debtors
      27500
 
C
10000
Less: R.D.D.
  • 1500
26000
General Reserve
3000
Investment
 
12000
Creditors
20000
Profit and Loss A/c
 
9000
A’s Loan Account
4000
Bank
 
2000
Bills Payable
7000
   
 
84000
  
84000

On the above date, the partners decided 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.

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An account opened to find out the profit or loss on sale of assets and settlement of liabilities.

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Dissolution expenses are credited to..............................

  1. Realisation account
  2. Cash/Bank account
  3. Partners’ capital account
  4. Partners’ loan account
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Solution for concept: Dissolution of Partnership Firm. For the courses 12th HSC Arts, 12th HSC Commerce, 12th HSC Commerce (Marketing and Salesmanship)
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