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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 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.
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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.
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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|
Sushil’s Capital |
20,000 | Plant and Machinery | 15,000 |
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22,000 |
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3,000 |
| Sundry Creditors | 10,000 | ||
| 55,000 | 55,000 |
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| X | 20000 | Less : R.D.D | 1000 | |
| Y | 10000 | Cash in hand | 2000 | |
| Z | 4000 | Cash at Bank | 3000 | |
| 80000 | 80000 | |||
On the above date the firm was dissolved and the assets realised as under:
1) Investment Rs 5,000, Stock Rs 24,000 and Debtors Rs 15,000.
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| Liabilities | Amount (Rs) | Assets | Amount (Rs) | |
| Sundry Creditors | 15400 | Cash at Bank | 3500 | |
| Bills payable | 3600 | Stock | 19800 | |
| A’s loan A/c | 10000 | Debtors | 15000 | 14000 |
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| Capital Accounts | Currnet Accounts | ||
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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 |
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- Dhwani’s Loan of ₹ 50,000 to the firm was settled by paying ₹ 42,000.
- Paavni’s Loan of ₹ 40,000 was settled by giving an unrecorded asset of ₹ 45,000.
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- Iknoor’s Loan of ₹ 80,000 to the firm and she took over Machinery of ₹ 60,000 as part payment.
You are required to pass necessary entries for all the above-mentioned transactions.
Hints:
- Dr. Dhwani’s Loan A/c by ₹ 50,000; Cr. Bank A/c by ₹ 42,000 and Realisation A/c by ₹ 8,000.
- Dr. Paavni’s Loan A/c and Cr. Realisation A/c by ₹ 40,000.
- Dr. Realisation A/c and Cr. Loan to Charu A/c by ₹ 60,000.
- Dr. Iknoor Loan A/c by ₹ 80,000; Cr. Realisation A/c by ₹ 60,000 and Bank A/c by ₹ 20,000.
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 | |
| 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 | ||
| 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.
| Debit side total of Realisation A/c |
Credit side total of Realisation A/c |
Loss on Realisation |
| ₹ 20,000 | ? | ₹ 4,000 |
Complete the following table:
| Debit side total of Capital A/c |
Credit side total of Capital A/c |
Cash brought by Partner |
| ₹ 51,000 | ? | ₹ 17,000 |
Pass the necessary journal entries for the following transactions on the dissolution of the partnership firm of Tina and Rina after various assets (other than cash) and external liabilities have been transferred to Realisation Account:
- An unrecorded asset of ₹ 18,000 was taken over by Tina at ₹ 16,000.
- Rina agreed to pay her brother's loan of ₹ 23,000.
- Stock of ₹ 30,000 was taken over by a creditor of ₹ 40,000 in full settlement.
- Expenses of dissolution ₹ 40,000 were paid by Rina.
- Creditors were paid ₹ 18,800 in full settlement of their account of ₹ 20,000.
- Tina's loan of ₹ 15,000 was paid through a cheque.
On the day of dissolution of the firm ‘Roop Brothers’ had partner’s capital amounting to ₹ 1,50,000 external liabilities ₹ 35,000, Cash balance ₹ 8,000 and P & L A/c (Dr.) ₹ 7,000. If Realisation expense and loss on Realisation amounted to ₹ 5,000 and ₹ 25,000 respectively, the amount realised by sale of assets is ______.
Complete the following table:
| Debit side total of Realisation A/c | Credit side total of Realisation A/c | Loss on Realisation |
| ₹ 30,000 | ? | ₹ 24,000 |
| ? | ₹ 10,000 | ₹ 40,000 |
Insolvent partner Capital A/c debit side total is ₹ 25,000 and credit side total is ₹ 10,000. Calculate deficiency.
Vinay, Premal and Monil were in partnership sharing profits and losses in the ratio 2 : 2 : 1. They decided to dissolve their partnership firm on 31st March, 2023 and their Balance Sheet on that date stood as:
| Balance Sheet as on 31st March, 2023 | |||||
| Liabilities | Amount (₹) | Amount (₹) | Assets | Amount (₹) | Amount (₹) |
| Capital : | Plant | 2,40,000 | |||
| Vinay | 1,80,000 | 3,60,000 | Debtors | 90,000 | |
| Premal | 1,20,000 | Stock | 1,50,000 | ||
| Monil | 60,000 | ||||
| Loan | 24,000 | ||||
| Sundry Creditors | 18,000 | ||||
| Bank Overdraft | 78,000 | ||||
| 4,80,000 | 4,80,000 | ||||
It was agreed that:
(1) Vinay to discharge Loan and to take Debtors at book value.
(2) Plant realised ₹ 2, 70,000.
(3) Stock realised ₹1,44,000.
( 4) Creditors were paid off at a discount of ₹ 90.
Show Realisation Account, Partner's Capital Accounts and Bank Account.
Read the following hypothetical situation and answer question on the basis of the same.
|
Nitya, Shreya and Ishita are partners in a firm. They share profit in the ratio of 5 : 3 : 2. Their fixed capital are ₹1,80,000; ₹1,60,000 and ₹2,00,000 respectively. For the year ending 31st March, 2022, Nitya withdrew ₹7,500 at the end of every quarter. |
The partnership deed provide that interest on capital will be allowed @10% p.a. The amount of interest on Ishita's capital will be:
Choose the correct order in which a partnership firm, at the time of its dissolution, will apply the amount realised from the sale of its assets, including any amount contributed by the partners, towards the payment of:
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Q: Firm's debts
R: Balance of partners' capital
S: Surplus divided amongst the partners in their profit-sharing ratio
Assertion: A revaluation account is prepared at the time of dissolution of a partnership.
Reason: A revaluation account is prepared to determine the net gain/loss on realisation of assets and settlement of liabilities.
Which one of the following is correct?
A firm having a debtor of ₹ 30,000 from whom the amount was due on 30th June, 2023, gets dissolved on 31st March, 2023. The debtor cleared his dues on the date of dissolution of the firm at a discount of 4% per annum.
Give the journal entry passed by the firm to realise the payment from the debtor.
Ira (a partner in a firm) was allowed to retain the whole of the stock as her remuneration for services rendered by her in the course of dissolution of the firm. The value of stock was ₹ 10,000 which had been transferred to the Realisation Account.
Complying with the accounting principle of full disclosure, record the above transaction in the books of the partnership firm at the time of its dissolution.
