Question

Srijan, Raman and Manan were partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1. On 31st March, 2017 their Balance Sheet was as follows:

Balance Sheet of Srijan, Raman and Manan as at 31-3-2017
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)
Capitals:		3,50,000	Capital: Manan	10,000
Srijan	2,00,000		Plant	2,20,000
Raman	1,50,000		Investments	70,000
Creditors		75,000	Stock	40,000
Bills Payable		40,000	Debtors	60,000
Outstanding Salary		35,000	Accrued Interest	7,000
			Prepaid Expenses	3,000
			Bank	10,000
			Profit and Loss Account	80,000
		5,00,000		5,00,000

On the above date they decided to dissolve the firm.

1. Srijan was appointed to realise the assets and discharge the liabilities. Srijan was to receive 5% commission on sale of assets (except cash) and was to bear all expenses of realisation.
2. Assets were realised as follows:
   

   	(₹)
   Plant	85,000
   Stock	33,000
   Debtors	47,000

3. Investments were realised at 95% of the book value and Accrued Interest Nil.
4. The firm had to pay ₹ 22,500 for an outstanding repair bill not provided for earlier.
5. Expenses of realisation amounting to ₹ 3,000 were paid by Srijan.

Prepare Realisation Account, Partner’s Capital Accounts and Bank Account.

Hint: No amount will be realised from accured interest and prepaid expenses.

Answer 1

Realisation Account
Particulars	₹	Particulars	₹
To Plant A/c	2,20,000	By Creditors A/c	75,000
To Investments A/c	70,000	By Bills Payable A/c	40,000
To Stock A/c	40,000	By Outstanding Salary A/c	35,000
To Debtors A/c	60,000	By Bank A/c – Plant	85,000
To Accrued Interest A/c	7,000	By Bank A/c – Stock	33,000
To Prepaid Expenses A/c	3,000	By Bank A/c – Debtors	47,000
To Bank A/c – Creditors	75,000	By Bank A/c – Investments	66,500
To Bank A/c – Bills Payable	40,000	By Srijan’s Capital A/c – Loss	81,030
To Bank A/c – Outstanding Salary	35,000	By Raman’s Capital A/c – Loss	81,030
To Bank A/c – Unrecorded Repair Bill	22,500	By Manan’s Capital A/c – Loss	40,515
To Srijan’s Capital A/c – Commission	11,575
Total	5,84,075	Total	5,84,075

Loss on Realisation = ₹ 2,02,575

Commission to Srijan:

Sale of assets = ₹ 85,000 + ₹ 33,000 + ₹ 47,000 + ₹ 66,500
= ₹ 2,31,500

Commission = ₹ 2,31,500 × 5% = ₹ 11,575

Partners’ Capital Accounts
Particulars	Srijan (₹)	Raman (₹)	Manan (₹)	Particulars	Srijan (₹)	Raman (₹)	Manan (₹)
To Profit & Loss A/c	32,000	32,000	16,000	By Balance b/d	2,00,000	1,50,000	—
To Realisation A/c – Loss	81,030	81,030	40,515	By Realisation A/c – Commission	11,575	—	—
To Balance b/d	—	—	10,000	By Bank A/c – Cash brought in	—	—	66,515
To Bank A/c	98,545	36,970	—
Total	2,11,575	1,50,000	66,515	Total	2,11,575	1,50,000	66,515

 

Bank Account
Particulars	₹	Particulars	₹
To Balance b/d	10,000	By Realisation A/c – Creditors	75,000
To Realisation A/c – Plant	85,000	By Realisation A/c – Bills Payable	40,000
To Realisation A/c – Stock	33,000	By Realisation A/c – Outstanding Salary	35,000
To Realisation A/c – Debtors	47,000	By Realisation A/c – Repair Bill	22,500
To Realisation A/c – Investments	66,500	By Srijan’s Capital A/c	98,545
To Manan’s Capital A/c	66,515	By Raman’s Capital A/c	36,970
Total	3,08,015	Total	3,08,015

Note: The realisation expenses of ₹ 3,000 paid by Srijan are not recorded separately, because Srijan had agreed to bear all realisation expenses.