Question

The following is the Balance Sheet of A and B as at 31st March, 2024.

Liabilities	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Mrs. A’s Loan	15,000	Cash		4,200
Mrs. B’s Loan	10,000	Bank		3,400
Trade Creditors	30,000	Debtors	30,000	28,000
Bills Payable	10,000	Less: Provision	2,000
Outstanding Expenses	5,000	Investments		10,000
A: Capital	1,00,000	Stock		40,000
B: Capital	80,000	Truck		75,000
		Plant & Machinery		80,000
		B: Drawings		9,400
	2,50,000			2,50,000

Firm was dissolved on this date.

1. Half the stock was sold at 10% less than the book value and the remaining half was taken over by A at 20% more than the book value.
2. During the course of dissolution a liability under action for damages was settled at ₹ 12,000 against ₹ 10,000 included in the creditors.
3. Assets realised as follows: Plant & Machinery - ₹ 1,00,000; Truck - ₹ 1,20,000; Goodwill was sold for ₹ 25,000; Bad Debts amounted to ₹ 5,000. Half the investments were sold at book value.
4. A promised to pay off Mrs. A’s Loan and took away half the investments at 10% discount.
5. Trade Creditors and Bills Payable were due on average basis of one month after 31st March, but were paid immediately on 31st March, at 12% discount per annum.

Prepare necessary accounts.

Hints: 

1. Discount received on payment to Creditors = `20,000xx12/100xx1/12` = ₹ 200
2. Discount received on payment to B/P = `10,000xx12/100xx1/12` = ₹ 100
3. Cash balance of ₹ 4,200 has been transferred to the debit of Bank Account. 

Answer 1

Dr.	Realisation A/c				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Sundry Assets:			By Trade Creditors		30,000
Debtors		30,000	By Bills Payable		10,000
Investments		10,000	By Outstanding Expenses		5,000
Stock		40,000	By Mrs. A’s Loan		15,000
Truck		75,000	By Mrs. B’s Loan		10,000
Plant & Machinery		80,000	By Provision for Doubtful Debts A/c		2,000
To Bank A/c (Creditors)		31,800	By Bank A/c		2,93,000
To Bank A/c (Bills payable)		9,900	Stock	18,000
To Bank A/c (Outstanding Expenses)		5,000	Plant & Machinery	1,00,000
To Bank A/c (Mrs. B’s Loan)		10,000	Truck	1,20,000
To A’s Capital A/c		15,000	Goodwill	25,000
To Profit on Realisation t/f to Capital A/c:			Debtors	25,000
A	43,400	86,800	Investments	5,000
B	43,400		By A Capital A/c (Stock)		24,000
			By A Capital A/c (Investment)		4,500
		3,93,500			3,93,500

 

Dr.	Partner’s Capital A/c				Cr.
Particulars	A	B	Particulars	A	B
To Realisation A/c (Investments taken over)	45,000	-	By Balance b/d	1,00,000	80,000
To Realisation A/c (Stock taken over)	24,000	-	By Realisation A/c - Profit	43,400	43,400
To Drawings	-	9,400	By Realisation A/c (Mrs. A’s loan taken over)	15,000	-
To Bank A/c	1,29,900	1,14,000
	1,58,400	1,23,400		1,58,400	1,23,400

 

Dr.	Bank A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	3,400	By Realisation A/c (Creditors)	31,800
To Cash A/c	4,200	By Realisation A/c (Bills Payable)	9,900
To Realisation A/c (Sundry Assets realised)	2,93,000	By Bank A/c (Outstanding expense)	5,000
		By Realisation A/c (Mrs. B’s Loan)	10,000
		By A Capital A/c	1,29,900
		By B Capital A/c	1,14,000
	3,00,600		3,00,600

Working Notes:

(i) Calculation of Payment to creditors:

Total creditors = ₹ 30,000

₹ 10,000 creditors were paid = ₹ 12,000

Remaining Creditors = ₹ 30,000 – 10,000

= ₹ 20,000

Remaining ₹ 18,000 creditors allowed Discount = `20,000xx12/100xx1/2`

= ₹ 200

Remaining creditors are paid = ₹ 20,000 – ₹ 200

= ₹ 19,800

Total Payment to creditors = ₹ 12,000 + ₹ 19,800

= ₹ 31,800

(ii) Calculation of Payment to Bills Payable:

Discount = `10,000xx12/100xx1/12`

= ₹ 100

Final Payment = ₹ 10,000 – ₹ 100

= ₹ 9,900