Question

X, Y and Z decided to dissolve their partnership firm. The position as at 31st December, 2023, the date of dissolution was as follows:

Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)
Creditors		20,000	Freehold Property	40,000
Bank Loan		5,000	Machinery	40,000
Capitals: X	70,000	1,30,000	Investments	16,000
Y	40,000		Stock	30,000
Z	20,000		Debtors	30,000
Current Accounts:		19,500	Cash	10,000
X	12,000		Loss in Business	20,000
Y	7,500		Current Account: Z	4,500
Reserve for Contingency		10,000
Commission Received in Advance		6,000
		1,90,500		1,90,500

They shared profits in the ratio of X : `1/2, "Y" : 3/10  "and"  "Z" : 1/5`.

X agreed to bear all realisation expenses. For this service X is paid ₹ 2,000. Actual expenses amounted to ₹ 3,200 which was withdrawn by him from the firm.

Other informations are:

1. Assets, with the exception of investments and Cash, are sold for ₹ 1,25,100. 75% of the investments are taken over by X at 75% of their book value. He also agrees to discharge the Bank Loan. The remaining investments were taken over by Y at the market value of 120%.
2. There were outstanding expenses amounting to ₹ 5,000. These were settled for ₹ 2,000.
3. A B/R for ₹ 10,000 was received from a customer Mr. Surender Kumar and the bill was discounted from the bank. Surender became insolvent and 75 paise per rupee were received from his estate.
4. Commission received in advance was returned to the Customers after deducting 60% for work done.

You are required to prepare the necessary accounts.

Hints: 

1. Reserve for contingency will be credited to capital accounts.

2. Following entries will be passed for realisation expenses:

(i)	Realisation A/c    ...Dr.	2,000	-
	To X A/c	-	2,000
(ii)	X A/c    ...Dr.	3,200	-
	To Cash A/c	-	3,200

3. Following entry may be passed on account of B/R discounted:

(i)	Cash A/c    ...Dr.	7,500	-
	To Realisation A/c	-	7,500
(ii)	Realisation A/c    ...Dr.	10,000	-
	To Cash A/c	-	10,000

Answer 1

Dr.	Realisation A/c			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Freehold Property A/c	40,000	By Creditors A/c		20,000
To Machinery A/c	40,000	By Bank Loan A/c		5,000
To Investments A/c	16,000	By Commission received in Advance A/c		6,000
To Stock A/c	30,000	By Cash A/c (Assets realised)		1,25,100
To Debtors A/c	30,000	By X’s Capital A/c (Investments taken over)		9,000
To X’s Capital A/c (Amount payable to X)	2,000	By Y’s Capital A/c (Investments taken over)		4,800
To X’s Capital A/c (Bank loan taken over)	5,000	By Cash A/c (Recovery from B/R discounted)		7,500
To Cash A/c (Outstanding Expenses)	2,000	By Loss on Realisation t/f to Capital A/c:
To Cash A/c (Payment for B/R discounted)	10,000	X	10,000
To Cash A/c (Advance commission returned)	2,400	Y	6,000
To Cash A/c (Creditors paid)	20,000	Z	4,000	20,000
	1,97,400			1,97,400

 

Dr.	Current A/c						Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
To Balance b/d	-	-	4,500	By Balance b/d	12,000	7,500	-
To P & L A/c (Loss in business)	10,000	6,000	4,000	By Reserve for Contingency A/c	5,000	3,000	2,000
To Realisation A/c (Loss)	10,000	6,000	4,000	By Capital A/c (Transfer)	3,000	1,500	10,500
	20,000	12,000	12,500		20,000	12,000	12,500

 

Dr.	Capital A/c						Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
To Current A/c (Transfer)	3,000	1,500	10,500	By Balance b/d	70,000	40,000	20,000
To Cash A/c	3,200	-	-	By Realisation A/c (Amount payable)	2,000	-	-
To Realisation A/c (Investments)	9,000	4,800	-	By Realisation A/c (Bank Loan taken over)	5,000	-	-
To Cash A/c (Final Payment)	61,800	33,700	9,500
	77,000	40,000	20,000		77,000	40,000	20,000

 

Dr.	Cash A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	10,000	By Realisation A/c (Realisation Expenses)	3,200
To Realisation A/c (Asset realised)	1,25,100	By Realisation A/c (Outstanding Expenses)	2,000
To Realisation A/c (Recovery from B/R discounted)	7,500	By Realisation A/c (Payment for B/R discounted)	10,000
		By Realisation A/c (Advance commission returned)	2,400
		By Realisation A/c (Creditors paid)	20,000
		By X’s Capital A/c	61,800
		By Y’s Capital A/c	33,700
		By Z’s Capital A/c	9,500
	1,42,600		1,42,600