Question

P, Q and R were partners in a firm sharing profits in the ratio of 1 : 2 : 2. Their Balance Sheet as at 31st March, 2024 was as follows:

Balance sheet of P, Q and R as at 31st March, 2024
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Creditors		2,10,000	Land and Buildings		5,00,000
Bank Overdraft		50,000	Office Equipment		8,000
Q’s Loan		40,000	Stock		2,00,000
Capitals:			Debtors	60,000	57,000
P	1,00,000	5,00,000	Less: Provision for Doubtful Debts	3,000
Q	2,00,000		Bank		35,000
R	2,00,000
		8,00,000			8,00,000

Partners agreed to dissolve the firm on that date. You are given the following information about dissolution:

1. One of the Debtors for ₹ 20,000 paid ₹ 12,000 in full settlement of his account and debtors of ₹ 5,000 were proved bad.
2. Part of the stock was sold for ₹ 20,000 (being 25% more than the book value).
3. Office Equipment was accepted by the creditor for ₹ 7,000 in full settlement. Another creditor of ₹ 40,000 was paid only 40% in full settlement of his account and remaining creditors accepted remaining stock in full settlement of their account.
4. An unrecorded asset of ₹ 20,000 was handed over to an unrecorded liability of ₹ 15,000 in full settlement.
5. Land & Buildings were sold at a loss of 20%
6. Q’s Loan was settled by payment of ₹ 30,000.
7. Realistion expenses ₹ 16,000 were paid by R.

You are required to prepare the necessary accounts.

Hints:

1. There will be no entry for unrecorded asset given to unrecorded liability.
2. Entry for payment of Q’s Loan will be:
   

   Q’s Loan A/c   ...Dr.	40,000	-
   To Bank A/c	-	30,000
   To Realisation A/c	-	10,000

Answer 1

Dr.	Realisation A/c				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Land and Buildings A/c		5,00,000	By Creditors A/c		2,10,000
To Office Equipment A/c		8,000	By Bank overdraft A/c		50,000
To Stock A/c		2,00,000	By Provision for Doubtful Debts A/c		3,000
To Debtors A/c		60,000	By Bank A/c:		4,67,000
To Bank A/c:		66,000	Debtors	47,000
Creditors	16,000		Stock	20,000
Bank overdraft	50,000		Land and Buildings	4,00,000
To R’s Capital A/c (Realisation expenses)		16,000	By Q’s loan		10,000
			By Loss on Realisation t/f to Capital A/c:		1,10,000
			P	22,000
			Q	44,000
			R	44,000
		8,50,000			8,50,000

 

Dr.	Partner’s Capital A/c						Cr.
Particulars	P	Q	R	Particulars	P	Q	R
To Realisation A/c (Loss)	22,000	44,000	44,000	By Balance b/d	1,00,000	2,00,000	2,00,000
To Bank A/c (Final Payment)	78,000	1,56,000	1,72,000	By Realisation A/c (Realisation expenses)	-	-	16,000
	1,00,000	2,00,000	2,16,000		1,00,000	2,00,000	2,16,000

 

Dr.	Q’s Loan A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Bank A/c	30,000	By Balance b/d	40,000
To Realisation A/c	10,000
	40,000		40,000

 

Dr.	Bank A/c				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Balance b/d		35,000	By Realisation A/c		66,000
To Realisation A/c		4,67,000	Creditors	16,000
Debtors	47,000		Bank overdraft	50,000
Stock	20,000		By Q’s Loan A/c		30,000
Land and Buildings	4,00,000		By P’s Capital A/c		78,000
			By Q’s Capital A/c		1,56,000
			By R’s Capital A/c		1,72,000
		5,02,000			5,02,000