Question

Shashwat and Shiv are equal partners. Their Balance Sheet stood as under :

Balance Sheets as on 31st March 2019.
Liabilities	Amount ₹	Assets	Amount ₹
Shaswat’s Capital A/c	6,000	Plant and Machinery	14,750
Creditors	39,000	Furniture	4,000
		Debtors	5,000
		Stock	6,250
		Cash at Bank	3,000
		Shiv’s Capital	12,000
	45,000		45,000

Due to weak financial position, all partners were declared bankrupt

The Assets were realised as follows :

Stock ₹3,500, Furniture ₹ 2,000, Debtors ₹ 5,000 and Machinery ₹ 7,000 The cost of collection and distributing the estate amounted to ₹ 1,500. Shashwat’s private estate in not sufficient even to pay his private debts, whereas in Shiv’s private estate there is a surplus of ₹ 500.

Prepare necessary ledger accounts to close the books of the firm.

Answer 1

Dr	In the books of Shashwat and Shiv  Realisation Account						Cr
Particulars		Amount ₹	Amount ₹	Particulars	Amount ₹	Amount ₹
To Sundry Assets A/c				By Bank A/c
Plant and Machinery		14,750		Stock	3,500
Furniture		4,000		Furniture	2,000
Debtors		5,000		Debtors	5,000
Stock		6,250	30,000	Machinery	5,000	17,500
To Bank A/c			1,500	By Partners’ Capital A/c (Loss on realisation transferred)
Realisation Exp.				Shashwat	7,000
				Shiv	7,000	14000
			31,500			31,500

 

Dr	Partners’ Capital Accounts						Cr
Particulars		Shashwat (₹)	Shiv (₹)	Particulars	Shashwat (₹)	Shiv (₹)
To Balance b/d			12,000	By Balance b/d	6000
To realisation A/c – Loss		7,000	7,000	By Bank A/c		500
				By Deficiency A/c	1000	18,500
		7,000	19,000		7000	19,000

 

Dr	Creditors Account				Cr
Particulars		Amount ₹	Particulars	Amount ₹
To Deficiency A/c		19,500	By Balance b/d	39,000
To Bank A/c		19,500
		39,000		39,000

 

Dr	Deficiency Account				Cr
Particulars		Amount ₹	Particulars	Amount ₹
To Shashwat’s Capital A/c		1000	By Creditors A/c	19,500
To Shiv’s Capital A/c		18,500
		19,500		19,500

 

Dr	Bank Account				Cr
Particulars		Amount ₹	Particulars	Amount ₹
To Balance b/d		3,000	By realisation Expense A/c	1,500
To Shiv’s Capital A/c		500	By Creditors A/c	19,500
To realisation A/c (Assets)		17,500
		21,000		21,000

Working Note:

As partners were not able to pay their loss amount, difference of amount is considered as deficiency of partners.