Question

Verma and Sharma were partners sharing profits in the ratio of 3 : 1. On 31-3-2011 their Balance

Sheet was as follows:

Balance Sheet of Verma and Sharma                                  as on 31-3-2011
Liabilities		Amount Rs	Assets	Amount Rs
Capitals:			Land and Building	70,000
Verma	1,20,000		Machinery	60,000
Sharma	80,000	2,00,000	Debtors	80,000
Creditors		70,000	Bank	60,000
		2,70,000		2,70,000

The firm was dissolved on 1-4-2011 and the Assets and Liabilities were settled as follows:

(i) Creditors of Rs 50,000 took over Land and Building in full settlement of their claim.

(ii) Remaining Creditors were paid in cash.

(iii) Machinery was sold at a depreciation of 30%.

(iv) Debtors were collected at a cost of Rs 500.

(v) Expenses of realisation were Rs 1,700.

Pass necessary Journal Entries for dissolution of the firm. 

 

Answer 1

Journal
Date	Particulars		L.F.	Debit Account Rs	Credit Amount Rs
2011
April, 1	Realisation A/c	Dr.		2,10,000
	To Land and Building A/c				70,000
	To Machinery A/c				60,000
	To Debtors A/c				80,000
	(Assets transferred to Realisation Account)
	Creditors A/c	Dr.		70,000
	To Realisation A/c				70,000
	(Creditors transferred to Realisation Account)
	Bank A/c	Dr.		1,21,500
	To Realisation A/c				1,21,500
	(Machinery and debtors realised)
	Realisation A/c	Dr.		20,000
	To Bank A/c				20,000
	(Remaining creditors paid off)
	Realisation A/c	Dr.		1,700
	To Bank A/c				1,700
	(Realisation expenses paid)
	Verma’s Capital A/c	Dr.		30,150
	Sharma’s Capital A/c	Dr.		10,050
	To Realisation A/c (WN)				40,200
	(Loss on realisation transferred to Partners’ Accounts)
	Verma’s Capital A/c	Dr.		89,850
	Sharma’s Capital A/c	Dr.		69,950
	To Bank A/c (WN)				1,59,800
	(Final payment made to Partners)