Question

Michael, Jackson and John are in partnership sharing profits and losses in the proportions of `1/2, 1/3 and 1/6`respectively. On 31st March, 2026, they decide to dissolve the firm. On this date, the Balance Sheet stood as:

Liabilities	₹	₹	Assets	₹
Sundry Creditors		40,000	Cash at Bank	3,000
Provision for Liability		5,000	Stock	50,000
Loan by Michael		5,000	Sundry Debtors	50,000
Workmen Compensation Reserve		21,000	Land and Building	57,000
Capital A/cs:		1,10,000	Profit & Loss A/c	15,000
Michael	60,000		Advertisement Suspense A/c	6,000
Jackson	40,000
John	10,000
		1,81,000		1,81,000

During the realisation process, a liability under a suit for damages is settled at ₹ 20,000 as against ₹ 5,000 provided for in the books of the firm.

Land and Building were sold for ₹ 40,000 and the Stock and Sundry Debtors realised ₹ 30,000 and ₹ 42,000 respectively. The expenses of realisation amounted to ₹ 1,200.

There was a car in the firm, which was written off from the books. It was taken by Michael for ₹ 20,000. He also agreed to pay Outstanding Salary of ₹ 20,000 not provided in books.

Prepare Realisation Account, Partners’ Capital Accounts and Bank Account in the books of the firm.

Answer 1

Dr.	Realisation Account				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Sundry Assets A/c (Transfer):		1,57,000	By Sundry Liabilities A/c (Transfer):		45,000
Stock	50,000		Sundry Creditors	40,000
Sundry Debtors	50,000		Provision for Liability	5,000
Land and Building	57,000		By Bank A/c (Assets Realised):
To Bank A/c (Expenses)		61,200	Land & Building	40,000	1,12,000
Provision for Liability	20,000		Stock	30,000
Realisation Expenses	1,200		Sundry Debtors	42,000
Sundry Creditors (paid in full)	40,000		By Michael’s Capital A/c (Car taken)		20,000
To Michael’s Capital A/c (O/S Salary)		20,000	By Loss on Realisation transferred to:		61,200
			Michael’s Capital A/c	30,600
			Jackson’s Capital A/c	20,400
			John’s Capital A/c	10,200
		2,38,200			2,38,200

 

Dr.	Partners’ Capital Accounts						Cr.
Particulars	Michael (₹)	Jackson (₹)	John (₹)	Particulars	Michael (₹)	Jackson (₹)	John (₹)
To Profit & Loss A/c (Loss)	7,500	5,000	2,500	By Balance b/d	60,000	40,000	10,000
To Advt. Suspense A/c	3,000	2,000	1,000	By Workmen Comp. Reserve	10,500	7,000	3,500
To Realisation A/c (Loss)	30,600	20,400	10,200	By Realisation A/c (O/S Salary)	20,000
To Realisation A/c (Car)	20,000			By Bank A/c (Cash brought in)			200
To Bank A/c (Final Payment)	29,400	19,600
	90,500	47,000	13,700		90,500	47,000	13,700

 

Dr.	Bank Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	3,000	By Realisation A/c (Liabilities & Exp.)	61,200
To Realisation A/c (Assets Realised)	1,12,000	By Loan by Michael	5,000
To John’s Capital A/c	200	By Michael’s Capital A/c	29,400
		By Jackson’s Capital A/c	19,600
	1,15,200		1,15,200