Question

Following is the balance sheet of P, Q and R who were sharing profits and losses in the ratio of 3 : 2 : 1.

Liabilities	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Bank Balance	12,000	Debtors	20,000	18,800
Creditors	70,000	Less: Provision	1,200
Mrs. P’s Loan	25,800	Stock		40,000
Capital Accounts:		3,000 Shares in A Co. Ltd.		30,000
P	1,20,000	Motor Car		75,000
Q	95,000	Plant		80,000
R	5,000	Advertisement Suspense A/c		84,000
	3,27,800			3,27,800

The firm was dissolved on that date and the following arrangements were made:

1. Assets realised as follows: Debtors ₹ 15,000; Plant at 30% discount.
2. Stock was valued at ₹ 36,000 and this was taken over by P and Q equally.
3. Market value of the shares of A Ltd. is ₹ 16 per share. Half the shares were sold in the market and the balance half were taken over by P and Q in their profit sharing ratio.
4. A creditor for ₹ 50,000 took over Motor Car in full settlement of his claim and the balance of creditors were paid at a discount of 2%.
5. Expenses of realisation amounted to ₹ 6,000. P agreed to discharge his wife’s Loan.

Prepare Journal entries and Ledger accounts.

Answer 1

Journal Entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
(i)	Realisation A/c    ...Dr.		2,45,000	-
	To Debtors A/c		-	20,000
	To Stock A/c		-	40,000
	To 3,000 Shares in A Co. Ltd. A/c		-	30,000
	To Motor Car A/c		-	75,000
	To Plant A/c		-	80,000
	(Being assets transferred to Realisation A/c)
(ii)	Creditors A/c    ...Dr.		70,000	-
	Mrs. P’s Loan A/c    ...Dr.		25,800	-
	To Realisation A/c		-	95,800
	(Being liabilities transferred to Realisation A/c)
(iii)	P’s Capital A/c    ...Dr.		42,000	-
	Q’s Capital A/c    ...Dr.		28,000	-
	R’s Capital A/c    ...Dr.		14,000	-
	To Advertisement Suspense A/c		-	84,000
	(Being Advertisement Suspense debited to Partner’s capital A/c)
(iv)	Provision for Doubtful Debts A/c    ...Dr.		1,200	-
	To Realisation A/c		-	1,200
	(Being Provision for Doubtful Debts transferred to Realisation A/c)
(v)	Realisation A/c    ...Dr.		25,800	-
	To P’s Capital A/c		-	25,800
	(Being Mrs. P’s loan taken over)
(vi)	P’s Capital A/c    ...Dr.		22,200	-
	Q’s Capital A/c    ...Dr.		14,800	-
	R’s Capital A/c    ...Dr.		7,400	-
	To Realisation A/c		-	44,400
	(Being Realisation loss credited to partners in 3 : 2 : 1)
(vii)	Bank A/c    ...Dr.		71,000	-
	To Realisation A/c		-	71,000
	(Being Amount realised on sale of Assets)
(viii)	P’s Capital A/c    ...Dr.		18,000	-
	Q’s Capital A/c    ...Dr.		18,000	-
	To Realisation A/c		-	36,000
	(Being Stock taken over by P & Q equally)
(ix)	Realisation A/c    ...Dr.		19,600	-
	To Bank A/c		-	19,600
	(Being Creditors paid at a discount of 2%)
(x)	Realisation A/c    ...Dr.		6,000	-
	To Bank A/c		-	6,000
	(Being Payment of realisation expenses)
(xi)	P’s Capital A/c    ...Dr.		14,400	-
	Q’s Capital A/c    ...Dr.		9,600	-
	To Realisation A/c		-	24,000
	(Being Shares taken over by P & Q in 3 : 2)
(xii)	P’s Capital A/c    ...Dr.		49,200	-
	Q’s Capital A/c    ...Dr.		24,600	-
	To Bank A/c		-	73,800
	(Being Final payment made to partners)

 

Dr.	Realisation A/c			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Debtors A/c	20,000	By Provision for Bad debts A/c		1,200
To Stock A/c	40,000	By Creditors A/c		70,000
To 3,000 Shares in A Co. Ltd. A/c	30,000	By Mrs. P’s Loan A/c		25,800
To Motor Car A/c	75,000	By Bank A/c (Assets realised):		71,000
To Plant A/c	80,000	Debtors	15,000
To Bank A/c (Creditors worth 20,000 paid at 2% discount)	19,600	Plant	56,000
To Bank A/c (Expenses of Realisation)	6,000	By P’s Capital A/c (Stock)		18,000
To P’s Capital A/c (Mrs. P’s Loan)	25,800	By Q’s Capital A/c (Stock)		18,000
		By Bank A/c (Shares)		24,000
		By P’s Capital A/c (Shares)		14,400
		By Q’s Capital A/c (Shares)		9,600
		By Loss on Realisation t/f to Capital A/c:		44,400
		P	22,200
		Q	14,800
		R	7,400
	2,96,400			2,96,400

 

Dr.	Partner’s Capital A/c						Cr.
Particulars	P	Q	R	Particulars	P	Q	R
To Advertisement Suspense A/c	42,000	28,000	14,000	By Balance b/d	1,20,000	95,000	5,000
To Realisation A/c - (Stock)	18,000	18,000	-	By Realisation A/c (Mrs. P’s Loan)	25,800	-	-
To Realisation A/c (Shares)	14,400	9,600	-	By Bank A/c (Amount brought in)	-	-	16,400
To Realisation A/c - Loss	22,200	14,800	7,400
To Bank A/c (Final Payment)	49,200	24,600	-
	1,45,800	95,000	21,400		1,45,800	95,000	21,400

 

Dr.	Bank A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Realisation A/c (Assets realised)	71,000	By Balance b/d	12,000
To Realisation A/c (Shares sold)	24,000	By Realisation A/c (Creditors paid)	19,600
To R’s Capital A/c	16,400	By Realisation A/c (Expenses of realisation)	6,000
		By P’s Capital A/c	49,200
		By Q’s Capital A/c	24,600
	1,11,400		111,400