Seeta and Geeta are partners in the firm sharing Profits and Losses in the ratio of 4:1. They decided to dissolve the partnership on 31st March 2020 on which date their Balance Sheet stood as follows. Balance Sheets as on 31st March 2020 Liabilities Amount (₹) Assets Amount (₹) Amount (₹) Capital: Furniture 14,000 Seeta 90,000 Plant 65,000 Geeta 40,000 Trademark 8,000 Sundry Creditors 35,000 Sundry Debtors 48,000 45,000 Bank Loan 15,000 Less: R.D.D 3,000 Stock 30,000 Cash in hand 10,000 Advertisement Suspense 8,000 1,80,000 1,80,000 Additional Information: Plant and Stock taken over by Seeta ₹ 78,000, and ₹ 22,000 respectively. Debtors Realised 90% of the Book Value and Trademark at ₹ 5,000. and Goodwill was realised for ₹ 7,000. Unrecorded assets estimated ₹ 4,500 was sold for ₹ 1,500. ₹ 1,000 Discount were allowed by creditors while paying their claim. The Realisation Expenses amounted to ₹ 3,500. You are required to prepare Realisation A/c, Cash A/c, and Partners Capital A/c.

In the books of Seeta and Geeta Dr. Realisation A/c Cr. Particulars Amount (₹) Amount (₹) Particulars Amount (₹) Amount (₹) To Sundry Assets A/c 1,65,000 By Sundry Liabilities A/c 53,000 Furniture 14,000 Bank Loan 15,000 Plant 65,000 Sundry Creditors 35,000 Trademark 8,000 By R.D.D. A/c (Transfer) 3,000 Sundry Debtors 48,000 By Seeta’s Capital A/c 1,00,000 Stock 30,000 Plant 78,000 To Cash A/c 52,500 Stock 22,000 To Bank Loan 15,000 By Cash A/c 56,700 To Sundry Creditors 34,000 Debtors 43,200 Expenses 3,500 Trademark 5,000 Goodwill 7,000 Unrecorded Assets 1,500 By Partner’s Capital A/c (Loss on realisation A/c) 7,800 Seeta 6,240 Geeta 1,560 2,17,500 2,17,500 Dr. Partners’ Capital Accounts Cr. Particulars Seeta (₹) Geeta (₹) Particulars Seeta (₹) Geeta (₹) To Advertisement Suspense A/c (Deferred Expense/Loss) 6,400 1,600 By Balance b/d 90,000 40,000 To Realisation A/c (Assets taken over) 1,00,000 - By Cash A/c (Final payment received) 22,640 - By realisation A/c (Loss) 6,240 1,560 To Cash A/c (Final payment) - 36,840 1,12,640 40,000 1,12,640 40,000 Dr. Cash Account Cr. Particulars Amount (₹) Particulars Amount (₹) To Balance b/d 10,000 By realisation A/c 52,500 To realisation A/c 56,700 By Geeta’s Capital A/c 36,840 To Seeta’s Capital A/c 22,640 89,340 89,340 Working Notes: Bank Loan is an external liability of the firm and therefore it is transferred to Realisation A/c. Amount recovered from Debtors = 90% of Gross Debtors = `90/100 xx 48,000` = ₹ 43,200. Amount paid to creditors = Value of Creditors – Discount given = 35,000 – 1,000 = ₹ 34,000. Sale of unrecorded assets for ₹ 1,500 is recorded on the credit side of realisation A/c and debit side of Cash A/c. It is presumed that Furniture realised nothing.

Dr. In the books of Seeta and Geeta Realisation Account Cr. Particulars Amount (₹) Amount (₹) Particulars Amount (₹) Amount (₹) To Sundry Assets A/c By Sundry Liabilities A/c Furniture 14,000 1,65,000 Bank Loan 15,000 53,000 Plant 65,000 Sundry Creditors 35,000 Trademark 8,000 By R.D.D. A/c (Transfer) 3,000 Sundry Debtors 48,000 By Seeta’s Capital A/c Stock 30,000 Plant 78,000 1,00,000 To Cash A/c Stock 22,000 Bank Loan 15,000 52,500 By Cash A/c Sundry Creditors 34,000 Debtors 43,200 56,700 Expenses 3,500 Trademark 5,000 Goodwill 7,000 Unrecorded Assets 1,500 By Partners’ Capital A/c (Loss on realisation transferred) Seeta 6240 7800 Geeta 1560 2,17,500 2,17,500 Dr. Partners’ Capital Accounts Cr. Particulars Seeta (₹) Geeta (₹) Particulars Seeta (₹) Geeta (₹) To Advertisement Suspense A/c (Deferred Expense/Loss) 6,400 1,600 By Balance b/d 90,000 40,000 To Realisation A/c (Assets taken over) 1,00,000 - To Realisation A/c (Loss) 6240 1560 By Cash A/c (Final payment received) 22,640 - To Cahs A/c (Final payment paid) - 36,840 1,12,640 40,000 1,12,640 40,000 Dr. Cash Account Cr. Particulars Amount (₹) Particulars Amount (₹) To Balance b/d 10,000 By realisation A/c 52,500 To realisation A/c 56,700 By Geeta’s Capital A/c 36,840 To Seeta’s Capital A/c 22,640 89,340 89,340 Working Notes : (1) Bank Loan is an external liability of the firm and therefore it is transferred to Realisation A/c. (2) Amount recovered from Debtors = 90 % of Gross Debtors = `90/100 xx 48,000` = ₹ 43,200. (3) Amount paid to creditors = Value of Creditors – Discount given = 35,000 – 1,000 = ₹ 34,000. (4) Sale of unrecorded assets for ₹ 1,500 is recorded on the credit side of realisation A/c and debit side of Cash A/c. (5) It is presumed that Furniture realised nothing.

Seeta and Geeta are partners in the firm sharing Profits and Losses in the ratio of 4:1. They decided to dissolve the partnership on 31st March 2020

Question

Seeta and Geeta are partners in the firm sharing Profits and Losses in the ratio of 4:1. They decided to dissolve the partnership on 31^stMarch 2020 on which date their Balance Sheet stood as follows.

Balance Sheets as on 31st March 2020
Liabilities	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capital:		Furniture		14,000
Seeta	90,000	Plant		65,000
Geeta	40,000	Trademark		8,000
Sundry Creditors	35,000	Sundry Debtors	48,000	45,000
Bank Loan	15,000	Less: R.D.D	3,000	45,000
		Stock		30,000
		Cash in hand		10,000
		Advertisement Suspense		8,000
	1,80,000			1,80,000

Additional Information:

Plant and Stock taken over by Seeta ₹ 78,000, and ₹ 22,000 respectively.
Debtors Realised 90% of the Book Value and Trademark at ₹ 5,000. and Goodwill was realised for ₹ 7,000.
Unrecorded assets estimated ₹ 4,500 was sold for ₹ 1,500.
₹ 1,000 Discount were allowed by creditors while paying their claim.
The Realisation Expenses amounted to ₹ 3,500.

You are required to prepare Realisation A/c, Cash A/c, and Partners Capital A/c.

Ledger

Solution 1

In the books of Seeta and Geeta
Dr.	Realisation A/c						Cr.
Particulars		Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Sundry Assets A/c			1,65,000	By Sundry Liabilities A/c		53,000
Furniture		14,000		Bank Loan	15,000
Plant		65,000		Sundry Creditors	35,000
Trademark		8,000		By R.D.D. A/c (Transfer)	3,000
Sundry Debtors		48,000		By Seeta’s Capital A/c		1,00,000
Stock		30,000		Plant	78,000
To Cash A/c			52,500	Stock	22,000
To Bank Loan		15,000		By Cash A/c		56,700
To Sundry Creditors		34,000		Debtors	43,200
Expenses		3,500		Trademark	5,000
				Goodwill	7,000
				Unrecorded Assets	1,500
				By Partner’s Capital A/c (Loss on realisation A/c)		7,800
				Seeta	6,240
				Geeta	1,560
			2,17,500			2,17,500

Dr.	Partners’ Capital Accounts						Cr.
Particulars		Seeta (₹)	Geeta (₹)	Particulars	Seeta (₹)	Geeta (₹)
To Advertisement Suspense A/c (Deferred Expense/Loss)		6,400	1,600	By Balance b/d	90,000	40,000
To Realisation A/c (Assets taken over)		1,00,000	-	By Cash A/c (Final payment received)	22,640	-
By realisation A/c (Loss)		6,240	1,560
To Cash A/c (Final payment)		-	36,840
		1,12,640	40,000		1,12,640	40,000

Dr.	Cash Account				Cr.
Particulars		Amount (₹)	Particulars	Amount (₹)
To Balance b/d		10,000	By realisation A/c	52,500
To realisation A/c		56,700	By Geeta’s Capital A/c	36,840
To Seeta’s Capital A/c		22,640
		89,340		89,340

Working Notes:

Bank Loan is an external liability of the firm and therefore it is transferred to Realisation A/c.
Amount recovered from Debtors = 90% of Gross Debtors = `90/100 xx 48,000` = ₹ 43,200.
Amount paid to creditors = Value of Creditors – Discount given = 35,000 – 1,000 = ₹ 34,000.
Sale of unrecorded assets for ₹ 1,500 is recorded on the credit side of realisation A/c and debit side of Cash A/c.
It is presumed that Furniture realised nothing.

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Solution 2

Dr.	In the books of Seeta and Geeta Realisation Account						Cr.
Particulars		Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Sundry Assets A/c				By Sundry Liabilities A/c
Furniture		14,000	1,65,000	Bank Loan	15,000	53,000
Plant		65,000		Sundry Creditors	35,000
Trademark		8,000		By R.D.D. A/c (Transfer)	3,000
Sundry Debtors		48,000		By Seeta’s Capital A/c
Stock		30,000		Plant	78,000	1,00,000
To Cash A/c				Stock	22,000
Bank Loan		15,000	52,500	By Cash A/c
Sundry Creditors		34,000		Debtors	43,200	56,700
Expenses		3,500		Trademark	5,000
				Goodwill	7,000
				Unrecorded Assets	1,500
				By Partners’ Capital A/c (Loss on realisation transferred)
				Seeta	6240	7800
				Geeta	1560
			2,17,500			2,17,500

Dr.	Partners’ Capital Accounts						Cr.
Particulars		Seeta (₹)	Geeta (₹)	Particulars	Seeta (₹)	Geeta (₹)
To Advertisement Suspense A/c (Deferred Expense/Loss)		6,400	1,600	By Balance b/d	90,000	40,000
To Realisation A/c (Assets taken over)		1,00,000	-
To Realisation A/c (Loss)		6240	1560	By Cash A/c (Final payment received)	22,640	-
To Cahs A/c (Final payment paid)		-	36,840
		1,12,640	40,000		1,12,640	40,000

Dr.	Cash Account				Cr.
Particulars		Amount (₹)	Particulars	Amount (₹)
To Balance b/d		10,000	By realisation A/c	52,500
To realisation A/c		56,700	By Geeta’s Capital A/c	36,840
To Seeta’s Capital A/c		22,640
		89,340		89,340

Working Notes :

(1) Bank Loan is an external liability of the firm and therefore it is transferred to Realisation A/c.

(2) Amount recovered from Debtors = 90 % of Gross Debtors = `90/100 xx 48,000` = ₹ 43,200.

(3) Amount paid to creditors = Value of Creditors – Discount given = 35,000 – 1,000 = ₹ 34,000.

(4) Sale of unrecorded assets for ₹ 1,500 is recorded on the credit side of realisation A/c and debit side of Cash A/c.

(5) It is presumed that Furniture realised nothing.

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Concept of Dissolution of Partnership Firm

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Q 5.Q 4.Q 6.

Chapter 6: Dissolution of Partnership Firm - Exercise 6.2 (Practical problems) [Page 246]

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Balbharati Book-Keeping and Accountancy [English] Standard 12 Maharashtra State Board

Chapter 6 Dissolution of Partnership Firm
Exercise 6.2 (Practical problems) | Q 5. | Page 246

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RELATED QUESTIONS

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

If an asset is taken over by partner from firm his capital account will be ___________.

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.

C and D were partners in a firm sharing profits in the ratio of 3:2. 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 :

(a) A creditor for Rs 2 00,000 accepted building of Rs 2,80,000 at Rs 2,20,000 and paid the firm Rs 20,000.

(b) A second creditor for Rs 75,000 accepted furniture at Rs 60,000 in full settlement of his claim.

(c) A third creditor amounting to Rs 80,000 accepted Rs 20,000 in cash and investments of the book value of Rs 65,000 in full settlement of his claim.

(d) Loss on dissolution was Rs 7,500. Pass necessary journal entries for the above transactions in the books of the firm assuming that all payments were made by cheque.

E and F were partners in a firm sharing profits in the ratio of 7:3. On 28-2-2016 the firm was dissolved. After transferring assets (other than cash) and outsider's liabilities to realization account you are given the following information:

(a) A creditor for Rs 3, 00,000 accepted building valued Rs 3, 75,000 and paid the firm Rs 75,000.

(b) A second creditor for Rs 93,000 accepted stock valued at Rs 90,000 in full settlement of his claim.

(c) A third creditor amounting to Rs 60,000 accepted Rs 37,000 in cash and investments of the book value of Rs 40,000 in full settlement of his claim.

(d) Loss on dissolution was Rs 7,000.

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

Pass necessary journal entries on the dissolution of a partnership firm in the following cases :

1) Expenses of dissolution were Rs 9,000.

2) Expenses of dissolution Rs 3,400 were paid by a partner, Vishal

3) Shiv, a partner, agreed to do the work for dissolution for a commission of Rs 4,500. He also agreed to bear the dissolution expenses. Actual dissolution expenses Rs 3,900 were paid from the firm's bank account.

4) Naveen, a partner, agreed to look after the dissolution work for which he was allowed a remuneration of Rs 3,000. Naveen also agreed to bear the dissolution expenses. Actual expenses on dissolution Rs 2,700 were paid by Naveen.

5) Vivek, a partner, was appointed to look after the dissolution work for a remuneration of Rs 7,000. He agreed to bear the dissolution expenses. Actual dissolution expenses Rs 6,500 were paid by Rishi, another partner, on behalf of Vivek.

6) Gaurav, a partner, was appointed to look after the work of dissolution for a commission of Rs 12,500. He agreed to bear the dissolution expenses. Gaurav took over furniture of Rs 12,500 as his commission. The furniture had already been transferred to realisation account.

Pass necessary journal entries on the dissolution of a partnership firm in the following cases :

1) Expenses of dissolution Rs 500 were paid by John, a partner.

2) Joney, a partner, agreed to bear the dissolution expenses for a commission of 750. Actual dissolution expenses 650 were paid by Joney

3) Bony, partner agreed to look after the dissolution work for a remuneration of Rs 3,700. He also agreed to bear the dissolution expenses. Actual dissolution expenses Rs 4,200 were paid by Bony from the firm’s cash.

4) Sony, a partner, was appointed to look after the dissolution work for a remuneration of Rs 10,000. Sony agreed to bear the dissolution expenses. Sony took away stock worth Rs 10,000 as his remuneration. The stock had already been transferred to realisation account.

5) Vikky, a partner, agreed to look after the dissolution work for a remuneration of Rs 12,000. Vikky also agreed to bear the dissolution expenses. Actual dissolution expenses Rs 12,500 were paid by another partner, Clive, on behalf of Vikky.

6) Dissolution expenses were Rs 5,000

Prachi, Ritika and Ishita were partners in a firm sharing profits and losses in the ratio of 5 : 3: 2. In spite of repeated reminders by the authorities, they kept dumping hazardous material into a nearby river. The court ordered for the dissolution of their partnership firm on 31st March 2012. Prachi was deputed to realise the assets and pay the liabilities. She was aid Rs 1,000 as the commission for her services. The financial position of the firm was as follows:

Liabilities

Assets

Creditors

Investment Fluctuation

Fund

Capitals

Prachi

Ritika

2,00,000

30,000

40,000

Furniture

Stock

Investments

Cash

Ishita's Capital

37,000

5,500

15,000

9,000

18,000

84,500

On dissolution, the cash or bank account is closed automatically.

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.

Answer in one sentence only.

What is dissolution of partnership firm?

Answer in one Sentence only.
Why is Realisation Account opened?

Write the word / term / phrase, which can substitute the following statements.
Debit balance in realisation account.

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

Write the word / term / phrase, which can substitute the following statement.
Liability likely to arise in future on happening of certain events.

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

The account which shows realisation of assets and discharge of liabilities.

State whether the following statement is True or False.

On dissolution Bank Overdraft is transferred to Realisation Account.

State whether the following statements is True or False.

A Solvent partner having debit balance to his Capital Account does not share the deficiency of Insolvent Partner’s Capital Account.

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

The insolvency loss at the time of dissolution of the firm is shared by the solvent partners in their profit sharing ratio.

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

Realisation Loss is not transferred to the insolvent partner’s capital account.

Select the most appropriate alternative from those given below :

Realisation Account is __________on realisation of assets.

Sushil and Sumit were in partnership sharing profits and losses in the proportion of 3/5 and 2/5 respectively. On 31^st March, 2005 they decide to dissolve the firm when their Balance Sheet was as under:

Balance Sheet as on 31^st March, 2005

Liabilities	Amount (Rs)	Assets	Amount (Rs)
Sushil’s Capital	20,000	Plant and Machinery	15,000
Sumit's Capital	18,000	Stock	15,000
General Reserve	5,000	Sundry Debtors	22,000
Sumit’s Loan A/c	2,000	Bank	3,000
Sundry Creditors	10,000
	55,000		55,000

The Assets realised as follows: Stock Rs 14,000, Plant and Machinery Rs 12,000 and Debtors Rs 20,000. The Sundry Creditors were paid Rs 9,000 in full settlement.

Prepare: Realisation Account, Partners Capital Accounts and Bank Account.

Gautam, Viral and Ashwin were Partners 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:		Building	73,900
Gautam	75000	Furniture	44,100
Virat	45000	Stock	25,400
Reserve Fund	27,000	Debtors	33,600
Creditors	48,500	Cash	15,000
Bank Loan	11,500	Ashwin’s Capital	15,000
	207000		207000

The firm was dissolved due to insolvency of Ashwin and the following was the result.

(i) The realisation of Assets were as follows:

a) The stock was completely damaged and could realise worth Rs 16,500 only.

b) Building was sold for Rs 49,800.

c) Furniture was realised by the firm at Rs 23,100 less than the book value.

d) A Customer who owes Rs 14,400 became insolvent and nothing could be recovered from his private estate.

(ii) Creditors were paid for Rs 36,900 in full settlement and Bank Loan was discharged fully.

(iii) The expenses of realisation Rs 4,100

(iv) Ashwin became insolvent and the firm could recover only Rs 4,000 from his private estate.

Prepare Realisation A/c, Partner’s Capital A/c and cash A/c to close the books of the firm.

(When one partner becomes insolvent)
Rahul, Rohit and Ramesh were partners in a firm sharing profit and losses in the ratio of 2:2:1 respectively.The Balance Sheet as on 31^st March, 2012 was as follows:
Balance Sheet as on 31^st December, 2011

Liabilities	Amount (Rs)	Assets		Amount (Rs)
Sundry Creditors	20000	Cash at Bank		8000
Bills payable	5000	Stock		20000
General Reserve	6000	Debtors	16000	15000
Rahul’s Loan A/c	16000	Less : R.D.D	1000	15000
Capital Account		Plant and Machinery		30000
Rahul	25000	Furniture		6000
Rohit	10000	Ramesh’s Capital A/c		3000
	82000			82000

The firm was dissolved on the above date:

The Assets realised as follows:
Debtors Rs 9,000, Plant and Machinery Rs 26,000, Stock Rs 14,000 and Furniture Rs 3,000.
The Creditors were paid Rs 18,000 in full settlement and the bills payable were paid in full.
The realisation expenses amounted to Rs 3,000.
Ramesh become insolvent and was able to bring in only Rs 1,800 from his private estate.

Prepare:

Realisation A/c
Bank A/c and
Partner’s Capital A/c

(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.

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

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.

Ram, Laxman and Bharat were partners sharing profit and losses in the ratio of 2 : 2 : 1. Following is the Balance Sheet as on 31st March, 2016 :
Balance Sheet as on 31st March, 2016

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)
Capital A/c :		Machinery	2,00,000
Ram	2,40,000	Stock	80,000
Laxman	80,000	Debtors 2,20,000
Bharat	80,000	Less : R.D.D. (12,000)	2,08,000

General Reserve	24,000	Investment	96,000
Creditors	1,92,000	Profit and Loss A/c	72,000
Bills Payable	56,000	Bank balance	16,000

	6,72,000		6,72,000

On the above date the partners decided to dissolve the firm:
(1) Assets were realised as under -

Machinery	Rs. 1,80,000
Stock	Rs. 72,000
Investments	Rs. 84,000
Debtors	Rs. 1,80,000

(2) Dissolution expenses were Rs. 12,000.
(3) Goodwill of the firm realised 96,000
Prepare :
(1) Realisation Account
(2) Partner's Capital Account
(3) Bank Account

State whether the following statement is ‘True’ or ‘False’
On dissolution, cash or bank account is closed automatically.

Rahul, Rohit and Ramesh were partners in a firm sharing profits and losses in the ratio of 2:2:1 respectively. The Balance Sheet as on 31.03.2013 was as follows :
Balance Sheet as on 31st Mar, 2013

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)	Amount (Rs.)
Sundry Creditors	20,000	Cash at Bank		8000
Bills Payable	5,000	Debtors	16000
General Reserve	6,000	Less : R.D.D.	(1000)	15,000
Rahul’s Loan A/c	16,000	Stock		20,000
Capital Account		Plant and Machinery		30,000
Rahul	25,000	Furniture		6,000
Rohit	10,000	Ramesh’s Capital Account		3,000
	82000			82000

The firm was dissolved on the above date :

(1) Assets realised as follows:

Debtors Rs. 9,000, Plant and Machinery Rs. 26,000, Stock Rs. 14,000, and Furniture Rs. 3,000.

(2) The creditors were paid Rs. 18,000, in full settlement and the bills payable were paid in full.

(3) The realisation expenses amounted to Rs. 3,000.

(4) Ramesh became insolvent and was able to bring in only Rs. 1,800 from his private estate.

Prepare :

(1) Realisation account

(2) Partner’s capital account and

(3) Bank account.

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

A solvent partner having debit balance to his Capital Account does not share the deficiency of insolvent partner Capital Account.

Ganesh and Kartik are partners sharing Profits and Losses equally. They decided to dissolve the firm on 31^stMarch 2018. Their Balance Sheets was as under :

Balance Sheets as on 31^stMarch 2018.
Liabilities	Amount ₹	Assets	Amount ₹
Creditors	18,400	Building	88,000
Bills Payable	5,600	Furniture	12,000
Reserve Fund	20,000	Debtors	32,000
Capital A/c :		Stock	24,000
Ganesh	40,000	Bills Receivable	4,000
Kartik	80,000	Cash	4,000
	1,64,000		1,64,000

Assets were realised as under :

Building ₹82,000, Debtors ₹ 22,000, Stock ₹ 20,000. Bills Receivable ₹ 3,200 and Ganesh agreed to take over Furniture for ₹10,000. Realisation Expenses amounted to ₹ 2,000.

Show Realisation A/c, Partners’ Capital A/c and Cash A/c.

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.’

Shailesh and Shashank were partners sharing Profits and Losses in the ratio of 3:2. Their Balance Sheet as on 31^st March 2019 was as follows.

Balance Sheets as on 31st December 2019.
Liabilities	Amount ₹	Assets	Amount ₹
Capital Account :		Building	7000
Shailesh	10,000	Plant	9,000
Shashank	6,000	Debtors	14,000
Current Account :		Stock	5,000
Shailesh	3,000	Bank	6,000
Shashank	2,000
Creditors	17,400
Bills payable	2,600
	41,000		41,000

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

1. Plant ₹ 8,000, Building ₹ 6,000, Stock ₹ 4,000 and Debtors ₹ 12,000.

2. Shailesh agreed to pay of the Bills Payable.

3. Creditors were paid in full.

4. Dissolution expenses were ₹ 1,400

Prepare Realisation A/c, Partners Current A/c, Partners Capital A/c, and Bank A/c

Sangeeta, Anita, and Smita were in partnership sharing Profits and Losses in the ratio 2: 2: 1. Their Balance Sheet as on 31^stMarch 2019 was as under:

Balance Sheets as on 31^st March, 2019
Liabilities	Amount (₹)	Assets	Amount (₹)
Capital:		Land	2,10,000
Sangeeta	60,000	Plant	20,000
Anita	40,000	Goodwill	15,000
Smita	30,000	Debtors	1,25,000
Sangeeta’s Loan A/c	1,20,000	Loans and Advances	15,000
Sundry Creditors	1,20,000	Bank	5,000
Bills Payable	20,000
	3,90,000		3,90,000

They decided to dissolve the firm as follows:

1. Assets realised as; Land recovered ₹ 1,80,000; Goodwill for ₹ 75,000; Loans and Advances realised ₹ 12,000; 10% of the Debts proved bad;

2. Sangeeta took Plant at book value.

3. Creditors and Bills payable paid at 5% discount.

4. Sangeeta’s Loan was discharged along with ₹ 6,000 as Interest.

5. There was a contingent liability in respect of bills of ₹ 1,00,000 which was under discount. Out of them, a holder of one bill of ₹ 20,000 became insolvent

Show Realisation Account, Partners Capital Account, and Bank Account.

Kalpana and Bela were partners sharing profits and losses in the ratio of 3: 2. Their Balance Sheet as on 31st March, 2019 was as follows:

Balance Sheet as on 31st March 2019
Liabilities	Amount (₹)	Assets	Amount (₹)
Capital Accounts:		Building	14,000
Kalpana	20,000	Plant	18,000
Bela	12,000	Debtors	28,000
Current Accounts:		Stock	10,000
Kalpana	6,000	Bank	12,000
Bela	4,000
Creditors	34,800
Bills Payable	5,200
	82,000		82,000

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

(1) Plant ₹ 16,000, Building ₹ 12,000, Stock ₹ 8,000 and Debtors ₹ 24,000.

(2) Kalpana agreed to pay off the Bill Payable.

(3) Creditors were paid in full.

(4) Dissolution expenses were ₹ 2,800.

Prepare: Realisation A/c, Partner's current A/c, Partner's Capital A/c and Bank A/c.

Anita and Binita are partners in a firm. Anita had taken a loan of ₹ 15,000 from the firm. How will Anita’s loan be closed in the event of dissolution of the firm?

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 the firm's dissolution, the balance of General Reserve shown in the Balance Sheet is credited to ______.

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

Distinguish between 'Dissolution of Partnership' and 'Dissolution of Partnership Firm' on the basis of Termination of business.

Riddhi and Siddhi are partners sharing profits and losses in the ratio of 2:1. The following is their balance sheet as on 31st March, 2019.

Balance Sheet as on 31st March, 2019
Liabilities	Amount (₹)	Assets		Amount (₹)
Capital A/c:		Building		60,000
Riddhi	80,000	Furniture		24,000
Siddhi	60,000	Machinery		20,000
Reserve Fund	16,000	Debtors	17,600	16,000
Siddhi's Loan A/c	4,000	Less: RDD	1,600	16,000
Creditors	30,000	Stock		40,000
		Investment		8,000
		Interest Receivable		2,000
		Bank		20,000
	1,90,000			1,90,000

The firm was dissolved on 31st March 2019.

The assets realised were: Machinery ₹ 22,000, Building ₹ 28,000, Stock ₹ 38,000 and Debtors ₹ 15,000.
Riddhi took over the Investment at ₹ 10,000 and Furniture at book value.
Siddhi agreed to accept ₹ 3,000 in full settlement of her Loan Account.
Dissolution expenses amounted to ₹ 4,000.
Interest receivable could not be recovered.

Prepare Realisation Account, Partners' Capital Account, Siddhi's Loan Account and 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.

Complete the table.

Creditors	Bills Payable	Third-Party Liabilities
₹ 16,000	₹ 12,000	?

Hema, Manisha and Limsy were in partnership firm sharing profits and losses in the ratio of 5:3:2. They decided to dissolve their partnership firm on 31^st March 2019 and their Balance sheet as on that date stood as:

Balance sheet as on 31st March,2019
Liabilities	Amount ₹	Assets	Amount ₹
Capital Account:		Machinery	1,00,000
Hema	1,50,000	Debtors	50,000
Manisha	80,000	Stock	70,000
Reserve Fund	10,000	Cash at Bank	30,000
Sundry Creditors	20,000	Limsy Capital A/c	20,000
Bills payable	10,000
	2,70,000		2,70,000

The firm was dissolved on 31^stMarch, 2019 and assets were realised as under:

Machinery realised 60% of its book value.
Out of debtors, Mr. Jagdish, our customer for ₹ 20,000 was declared insolvent and nothing could be recovered from him. Other debtors are good and recovered and realised.
Hema took stock at an agreed value of ₹ 50,000.
Creditors and Bills payable were paid at 10% discount.
Limsy became insolvent and nothing was recovered from her estate.

Prepare:

Realisation Account
Partners’ Capital Account
Bank Account

Pass necessary Journal Entries for the following transactions on the dissolution of a partnership firm of Mita and Sonu on 31^st March, 2022 after the various assets other than cash and third party liabilities have been transferred to the Realisation Account.

Creditors of ₹ 90,000 took over Land and Building of ₹ 2,00,000 in full settlement of their claim.
Sonu took over debtors amounting to ₹ 50,000 at ₹ 40,000.
Realisation expenses ₹ 1,800 were paid by Sonu.
A machine which was not recorded in the books was taken over by Mita at ₹ 11,000 while its expected market value was ₹ 15,000.
Sortu agreed to pay off his wife's loan of ₹ 20,000.
Profit on dissolution amounted at ₹ 50,000.

Do you agree or disagree with the following statement:

On dissolution, cash/bank account is closed automatically.

Amul and Sumul were partners sharing profits and losses in the ratio of 3 : 2. Their Balance Sheet as on 31st March, 2023 was as follows:

Balance Sheet as on 31st March, 2023
Liabilities	Amount (₹)	Assets	Amount (₹)
Capital Accounts :		Building	10,500
Amul	15,000	Plant	13,500
Sumul	9,000	Debtors	21,000
Current Accounts:		Stock	7,500
Amul	4,500	Bank	9,000
Sumul	3,000
Creditors	26,100
Bills Payable	3,900
	61,500		61,500

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

(1) Plant ₹ 12,000, Building ₹ 9,000, Stock ₹ 6,000, and Debtors ₹ 18,000.

(2) Amul agreed to pay off the Bills Payable.

(3) Creditors were paid in full.

(4) Dissolution expenses were ₹ 2,100.

Prepare: Realisation A/c, Partners' Current A/cs, Partners' Capital A/cs and Bank A/c.

Mita and Sita, sharing profits in, the ratio 2 : 1, decided to dissolve their partnership firm on 31^st March, 2022, on which date their Balance Sheet was as under:

Balance Sheet of Mita and Sita as on 31st March, 2022
Liabilities		(₹)	Assets		(₹)
Sundry Creditors		40,000	Land & Building		29,000
Sita's Son's Loan		2,000	Plant & Machinery		20,000
Bank Overdraft		8,000	Stock		3,000
Capital Accounts:			Debtors	26,400	26,000
Mita	20,000	30,000	Less: Provision for Doubtful Debts	400	26,000
Sita	10,000	30,000	Bank		2,000
		80,000			80,000

The partnership firm was dissolved on the date of the Balance Sheet subject to the following adjustments:

Trade creditors accepted plant and machinery at an agreed valuation of 10% less than the book value and the balance in cash in full settlement of their claims.
Debtors of ₹ 1,000 proved bad.
Sita took over the stock at a discount of 20%.
Realisation expenses of ₹ 1,100 were paid by the firm.

You are required to prepare the Realisation Account.

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.

Seeta and Geeta are partners in the firm sharing Profits and Losses in the ratio of 4:1. They decided to dissolve the partnership on 31st March 2020

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Seeta and Geeta are partners in the firm sharing Profits and Losses in the ratio of 4:1. They decided to dissolve the partnership on 31st March 2020

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