D. K. Goel solutions for Accountancy Volume 1 and 2 [English] Class 12 ISC chapter 5 - Dissolution of Partnership Firm [Latest edition]

Tara and Anjali were partners in a firm sharing profits and losses equally. They dissolved their partnership firm on 31st March, 2021.

On this date, the Balance Sheet of their firm; apart from the realisable assets and outside liabilities, showed the following:

Additional information:

On the dissolution of the firm:

1. The firm realised ₹ 22,000 from the sale of assets and paid ₹ 7,000 to discharge its outside liabilities.
2. The Realisation Account showed a profit of ₹ 6,000 which was shared by the partners in their profit-sharing ratio.
3. The Partner’s Capital Accounts were closed, with a partner, either bringing in cash to cover the deficit of her capital or a partner being paid off her surplus capital.
4. The Bank Account was closed.

You are required to prepare the Bank Account on the date of dissolution of the firm to determine its balance at bank as shown in the Balance Sheet as at 31st March, 2021.

Ritesh and Farhan are partners in a firm sharing profits and losses in the ratio of 3 : 1. They decided to dissolve their firm on 31st March, 2021.

You are required to pass the necessary journal entries for the following, after the realisable assets and outside liabilities have been transferred to the Realisation Account.

1. Creditors of ₹ 20,000 were paid the amount due to them, by giving them an unrecorded asset worth ₹ 4,000 and the balance in cash.
2. Ritesh’s Loan of ₹ 1,00,000 was settled by giving him an unrecorded asset of ₹ 50,000 at ₹ 60,000 and the balance in cash.
3. Bills Payable of ₹ 30,000 were due to be paid on 30th April, 2021. They were paid on the date of dissolution of the firm at a rebate of 5% per annum.
4. Realisation expenses of ₹ 2,000 were to be borne by Farhan. These were paid by the firm on his behalf.

Mitesh, Samir and Ajay were partners sharing profits and losses in proportion to their capitals, which on 31st March, 2023, stood at:

Mitesh – ₹ 1,50,000

Samir – ₹ 1,00,000

Ajay – ₹ 50,000

The firm’s recorded liabilities on that date amounted to ₹ 1,00,000.

In addition:

• Ajay had given a loan of ₹ 40,000 to the firm on which he was entitled to receive interest @ 6% per annum for the whole year.
• A Bills Receivable of ₹ 40,000 discounted with the bank was dishonoured on 31st March, 2023.

The partners dissolved their partnership firm on 31st March 2023, and the assets, apart from cash of ₹ 30,000, realised ₹ 6,00,000.

Expenses of dissolution amounting to ₹ 12,500 were to be borne by Samir. These were paid by the firm on his behalf.

You are required to prepare:

1. Realisation Account.
2. Ajay’s Loan Account.

Adit and Shiv were partners sharing profits and losses in the ratio of 5 : 4. They dissolved their partnership firm on 31^st March 2023, when their Balance Sheet showed the following balances:

On the date of dissolution of the firm:

1. The firm suffered a loss of ₹ 18,000 upon realisation of assets and settlement of liabilities.
2. The expenses of dissolution of ₹ 3,000, to be borne by Shiv, were paid by the firm on his behalf.
3. The firm had furniture of ₹ 15,000. Adit took over some pieces of the furniture at ₹ 9,000 (being 10% less than the book value). Shiv took over the remaining furniture at 80% of its book value.

You are required to prepare the Partners Capital Accounts.

Atul and Peter were partners in a firm sharing profits and losses in the ratio of 3 : 5. They dissolved their firm on 31st March, 2024, when their Balance Sheet showed the following balances:

On the date of dissolution of the firm:

1. Peter paid the realisation expenses of ₹ 2,000 on behalf of the firm.
2. Atul discharged his wife’s loan of ₹ 5,000 which she had given to the firm.
3. The dissolution resulted in a profit of ₹ 24,000 from the realisation of assets and settlement of liabilities.

You are required to pass journal entries to close the books of the firm (including the entries to show the final settlement of the amount due from the partners/due to the partners by the firm).

Give one distinction between reconstitution of a firm and dissolution of a firm.

What is the object of a realisation account in dissolution of partnership?

State the difference between dissolution of partnership and dissolution of partnership firm.

Mention the order in which the proceeds from the sale of assets are utilised at the time of dissolution of partnership firm.

Why is the balance at bank never transferred to the realisation account on the dissolution of a partnership?

How are the realisation expenses dealt with when a partnership firm is dissolved?

Explain the accounting treatment at the time of dissolution of a partnership firm, of the assets and liabilities not already recorded in the books of the firm.

How should assets which are taken over by a partner be recorded in the partnership books on dissolution?

On dissolution, what entry is passed if a partner takes over an asset of the firm valued ₹ 10,000 at ₹ 6,000?

When an asset is taken over by a partner, why is his capital account debited?

When a liability is to be discharged by a partner, why is his capital account credited?

Do you think that the loan by a partner is transferred to realisation account at the time of dissolution of a firm? Why?

Do you think that the loan by a partner’s relative is transferred to realisation account at the time of dissolution of a firm? Why?

How are debts of the firm and private debts dealt with in case of dissolution of partnership?

How is workmen compensation reserve shown in the balance sheet of a partnership firm, treated at the time of its dissolution?

How would you treat employees provident fund shown on the liability side of balance sheet, at the time of dissolution of partnership firm and why?

Give any two differences between revaluation account and realisation account.

How will you deal with unrecorded assets and liabilities at the time of dissolution of a firm?

On dissolution of the firm, partner A demands that his loan of ₹ 1,00,000 should be paid before payment of Capitals of the partners, whereas partners B and C demand that Capitals should be paid before the payment of A’s loan. State the order of payment.

A and B are partners in a firm sharing profits in the ratio of 3 : 2. Mrs. A has given a loan of ₹ 20,000 to the firm and the firm also obtained a loan of ₹ 10,000 from B. The firm was dissolved and its assets were realised for ₹ 25,000. State the order of payment of Mrs. A’s Loan and B’s Loan with reason, if there were no creditors of the firm.

On dissolution of a firm, its Balance Sheet revealed total creditors ₹ 50,000; Total Capital ₹ 48,000; Cash Balance ₹ 3,000. Its assets were realised at 12% less. What will be loss on realisation?

On dissolution of a firm, there was an unrecorded asset of ₹ 2,000 which was taken over by a partner at ₹ 2,500. What entry will be passed?

In the Balance Sheet Total Debtors appear at ₹ 50,000 and Provision for Doubtful Debts appear at ₹ 1,500. How much amount will be realised from Debtors, if bad debts amount to ₹ 10,000 and remaining debtors are realised at a discount of 5%.

There was a contingent liability for B/R received from Ashok for ₹ 20,000 and discounted with the bank. Ashok became insolvent and 75 paise in a rupee were received from his estate. How much amount will be debited/credited to realisation account?

P, a partner, is to bear all expenses of realisation for which he is to be paid ₹ 2,000. P had to pay realisation expenses of ₹ 2,500. How much amount will be debited to Realisation Account?

Total creditors amounted to ₹ 5,00,000. Investments valued ₹ 2,00,000 were not shown in the books. One of the creditors took over these investments in full satisfaction of his debt of ₹ 2,20,000. Remaining creditors were paid at 5% discount. Pass entry for payment.

Creditors amounting to ₹ 80,000 are transferred to Realisation Account. What entry will be made on their payment if ₹ 10,000 of the creditors are not to be paid and the remaining creditors agreed to accept 20% less amount?

X, Y and Z are partners in a firm in the ratio of 4 : 3 : 2. On firm’s dissolution, firm’s total assets are ₹ 70,000, creditors are ₹ 15,000. realisation expenses are ₹ 2,100. Assets realised 15% more than the book-value. Creditors were paid 2% more. For profit/loss on realisation, Y’s capital account will be debited/credited with how much amount?

The firm of Ravi and Mohan was dissolved on 31.3.2024. According to the agreement, Ravi had agreed to undertake the dissolution work for an agreed remuneration of ₹ 2,000 and bear all realisation expenses. Dissolution expenses were ₹ 1,500 and the same were paid by the firm. Pass necessary Journal Entry for the payment of dissolution expenses.

Mohan and Kanwar are partners in a firm. Their firm was dissolved on 1.1.2024. Mohan was assigned the work of dissolution. For this work Mohan was to be paid ₹ 500. Mohan paid dissolution expenses of ₹ 400 from his own pocket. Will any Journal Entry be passed for ₹ 400 paid by Mohan? If yes, pass the entry. If no, give reason.

How will the firm record the payment of realisation expenses which were to be borne by a partner, but paid by the firm on his behalf?

In settlement of Tarun’s (a Partner) loan of ₹ 25,000 to the firm, a Computer not appearing the books is taken over by him at an agreed value of ₹ 30,000. Pass necessary journal entry.

C’s Capital Account has a credit balance of ₹ 2,00,000; C’s Loan Account is showing a debit balance of ₹ 40,000. Bank Balance is ₹ 3,00,000. Show the treatment of C’s Loan A/c.

At which value the assets against which provisions exist are transferred to realisation account?

What is the treatment of provisions against assets on dissolution of a firm?

What entry is passed when an asset is given to a creditor in full settlement of his dues?

Provision for Depreciation ₹ 65,000; Provision for Doubtful Debts ₹ 30,000; and Provident Fund ₹ 1,50,000 has been transferred to the Credit side of Realisation Account. For which item payment is to be made by the firm?

Sundry Creditors ₹ 2,50,000 and Bills Payable ₹ 35,000 have been transferred to the Credit side of Realisation Account. Sundry Creditors were paid at a discount of 10%. What would be the further treatment if nothing else is mentioned?

State the reason why a partner’s wife loan is transferred to realisation A/c?

Why partner’s loan is not transferred to realisation A/c?

When a creditor takes over an asset whose value is less than the amount due to him in full settlement of his claim, what entry shall be passed?

Dissolution expenses amounting to ₹ 6,000 were to be borne by partner X and the balance by the firm. Dissolution expenses amounted to ₹ 15,000 and the entire amount was paid by firm. Pass journal entry.

Dissolution expenses amounting to ₹ 15,000 were to be borne by partner Y and the balance by the firm. Dissolution expenses amounted to ₹ 25,000 and the entire amount was paid by Y. Pass journal entry.

Fixed assets appear in the balance sheet of a firm at ₹ 52,000. They realised at a loss of 4% on net collection. State the amount collected from such assets.

State the Application of Assets as per Section 48 of the Indian Partnership Act, 1932.

State the order of payment of the following, in case of dissolution of partnership firm:

1. to each partner proportionately what is due to him/her from the firm for advances as distinguished from capital (i.e., partner’s loan);
2. to each partner proportionately what is due to him on account of capital; and
3. for the debts of the firm to the third parties.

P, Q and R were partners with capitals of ₹ 3,00,000, ₹ 2,00,000 and ₹ 1,00,000 respectively. On dissolution it was found that there were 600 shares of ₹ 30 each in Gabriel Ltd., acquired at a cost of ₹ 24,000 and had been written off completely from the books. These shares are now valued at ₹ 60 each and divided among the partners in their profit sharing ratio. Give necessary Journal entry.

B, C and D were partners in a firm sharing profits and losses in the ratio of 1: 4: 5. On 31st March, 2018 the firm was dissolved and on that date the Balance Sheet of the firm showed a loan of ₹ 10,000 given by C’s brother F. C agreed to pay his brother’s loan.

Pass necessary journal entry for the above on the firm’s dissolution.

At the time of dissolution of a partnership firm, the book value of sundry assets transferred to Realisation Account was ₹ 2,00,000. 50% of these sundry assets were taken by partner A at 20% discount, 40% of remaining assets were sold at a profit of 30% on cost. 5% of the balance was found obsolete and realised nothing. The remaining assets were taken over by a creditor in full settlement of his claim.

Pass necessary journal entry for the above.

Name an item which is transferred to credit side of Realisation Account at the time of dissolution of partnership firm, but does not involve cash payment.

Mention any two circumstances which can lead to dissolution of partnership.

What is the status of the firm upon the dissolution of partnership?

A firm had given a loan to one of its partners. Give the journal entry to close this Loan Account at the time of dissolution of the partnership firm.

At the time of dissolution of a partnership firm, its Balance Sheet showed the stock of ₹ 30,000 comprising easily marketable items, obsolete items and a few miscellaneous other items. These items were realized as:

• Easily Marketable Items: 65% of the total inventory in full.
• Obsolete items: 20% of the total inventory had to be discarded.
• The miscellaneous other items in the stock are at 40% of their book value.

You are required to pass the journal entry for the realisation of stock.

At the time of dissolution of a partnership firm, its Balance Sheet showed stock of ₹ 40,000 comprising of easily marketable items, obsolete items and a few miscellaneous other items. These items were realised as:

• Easily marketable items: 70% of the total inventory - in full.
• Obsolete items: 10% of the remaining inventory - discarded.
• The miscellaneous other items in the stock - 20% of their book value.

You are required to calculate the amount realised from the sale of stock.

A firm having a debtor of ₹ 30,000 from whom the amount was due on 30^th June, 2023, gets dissolved on 31st March, 2023. The debtor cleared his dues on the date of dissolution of the firm at a discount of 4% per annum.

Give the journal entry passed by the firm to realise the payment from the debtor.

Ira (a partner in a firm) was allowed to retain the whole of the stock as her remuneration for services rendered by her in the course of dissolution of the firm. The value of stock was ₹ 10,000 which had been transferred to the Realisation Account.

Complying with the accounting principle of full disclosure, record the above transaction in the books of the partnership firm at the time of its dissolution.

Mention the liability of a partnership firm which is not shown in its balance sheet but is paid off at the time of the dissolution of the firm.

State the following statement is true:

There is no difference between the dissolution of partnership and dissolution of firm.

State the following statement is true:

Loan from the wife of a partner is treated just like a loan from the partner himself.

State the following statement is true:

Whenever the partnership changes, the old firm stands dissolved and a new firm comes into existence.

State the following statement is true:

Partner’s personal assets can also be used for payment of firm’s liabilities.

State the following statement is true:

The firm will be necessarily dissolved, even if a single partner becomes insolvent.

State the following statement is true:

Goodwill will be raised in the books of the firm on its dissolution.

State the following statement is true:

Partner’s loans have to be paid before any payment is made to any of the partners as capital.

State the following statement is true:

A ‘Revaluation Account’ is opened on the dissolution of a firm.

State the following statement is true:

On the dissolution of a firm, goodwill will be sold like any other asset.

State the following statement is true:

On the dissolution of a firm, the realisation account is debited with all the liabilities of the firm.

State the following statement is true:

On the dissolution of a firm, cash-in-hand is transferrred to the ‘Realisation Account’.

State the following statement is true:

Gain on the dissolution of a firm is divided in the capital ratio.

State the following statement is true:

Dissolution of partnership automatically results in the dissolution of the firm.

Manoj and Nand were partners sharing profits in the ratio of 3 : 2. Pass journal entries under following situations at the time of dissolution of firm:

1. Workmen Compensation Reserve stood at ₹ 1,00,000 and there was no liability towards Workmen Compensation.
2. Workmen Compensation Reserve stood at ₹ 1,00,000 and liability in respect of it was acertained at ₹ 75,000.
3. Workmen Compensation Reserve stood at ₹ 1,00,000 and liability in respect of it was ascertained at ₹ 1,20,000.
4. Workmen Compensation Reserve stood at ₹ 1,00,000 and liability in respect of it was ascertained at ₹ 1,00,000.

1. Expenses of realisation ₹ 8,000.
2. Expenses of realisation ₹ 10,000 were paid by a partner.
3. Realisation expenses of ₹ 12,000 were to be met by Tushar, a partner, but were paid by the firm.
4. Suresh, a partner, was paid remuneration of ₹ 10,000 and he was to meet all expenses.
5. Viru, a partner, was paid remuneration of ₹ 15,000 and he was to meet all expenses. Actual Expenses amounted to ₹ 20,000 which were paid by the firm.
6. Realisation expenses amounting to ₹ 15,000 were paid by the firm. ₹ 10,000 were to be borne by a partner and the balance by the firm.
7. Gauri, a partner, was allowed a remuneration of ₹ 25,000 and he was to meet all expenses. Firm paid an expense of ₹ 5,000.

Pass necessary Journal Entires on the dissolution of a partnership firm in the following cases:

1. L, a partner, was appointed to look after the dissolution process for which he was given a remuneration of ₹10,000.
2. Dissolution expenses ₹ 8,000 were paid by the partner, M.
3. Dissolution expenses were ₹ 5,000.
4. P, a partner, was appointed to look after the process of dissolution for which he was allowed a remuneration of ₹ 7,000. P agreed to bear the dissolution expenses. Actual dissolution expenses ₹ 4,000 were paid by P.
5. N, a partner, was appointed to look after the process of dissolution for which he was allowed a remuneration of ₹ 9,000. N agreed to bear the dissolution expenses. Actual dissolution expenses ₹ 4,000 were paid by the firm.
6. Q a partner was appointed to look after the process of dissolution for which he was allowed a remuneration of ₹ 18,000. Q agreed to take over stock worth ₹ 18,000 as his remuneration. The stock had already been transferred to Realisation Account.

The following is the Balance Sheet of A and B as at 31st March, 2023. The profit sharing ratios of the partners are 3 : 2.

The partners decided to dissolve the firm on and from the date of the Balance Sheet. Motor Vehicles and Stock were sold for cash at ₹ 16,950 and ₹ 77,600 respectively and all Debtors were realised in full. Land & Buildings were sold at ₹ 43,500. Creditors were paid off subject to discount of ₹ 1,700. Expenses of realisation were ₹ 1,250

Prepare Realisation Account, Bank Account and Partner’s Capital Accounts to close the books of the firm as a result of its dissolution.

Hint: Amount realised from Debtors ₹ 1,13,200.

A and B were partners sharing profits and losses in 2 : 1. Their Balance Sheet as at 31st March, 2024 was as follows:

Partners decide to dissolve the firm on the above date. Assets and liabilities realised as follows:

1. Plant & Machinery was taken over by A at 60% of the book value.
2. Investments were taken over by B at 120%.
3. Sundry Creditors were paid off by giving them stock at 75% of the book value and the balance in cash.
4. Debtors realised 20% less of the amount due from them.
5. A's loan was paid off with interest for six months.
6. Realisation expenses amounted to ₹ 1,000.

You are required to prepare:

1. Realisation Account
2. A’s Loan Account and B’s Loan Account
3. Partner’s Capital Accounts, and
4. Bank Account.

Hint: Payment to Sundry Creditors ₹ 60,000.

A, B and C were in partnership sharing profits in the ratio of 2 : 1 : 1. Their Balance Sheet showed the following position on the date of dissolution:

1. A agreed to take over furniture at 20% less than the book value.
2. Stock was realised for ₹ 52,400.
3. Bad Debts amounted to ₹ 5,000.
4. Expenses of realisation were ₹ 3,000. Creditors were paid at a discount of 5%.
5. There was a claim of ₹ 6,400 for damages against the firm. It had to be paid.

Prepare necessary accounts.

Hints:

1. Nothing is mentioned in the question about the payment of B/P and Mrs. A’s loan. It will be assumed that these will be paid in full.
2. Nothing is mentioned in the question about the realisation of fixed assets. It will be assumed that it has realised at the book value given in the balance sheet, i.e., at ₹ 50,000.

The following was the Balance Sheet of X, Y and Z as at 28.2.2023:

The firm was dissolved on the above date on the following terms:

1. Debtors realized ₹ 29,000 and creditors and bills payable were paid at a discount of 10%.
2. Stock was taken over by X for ₹ 17,000 and furniture was sold to K for ₹ 20,000.
3. Land and Building was sold for ₹ 2,98,000.
4. G’s loan was paid by a cheque of the same amount.
5. Compensation to workmen paid by the firm amounted to ₹ 15,000.

Prepare Realisation Account, Capital Accounts and Bank Account.

Hint: Workmen Compensation Reserve credited to Realisation A/c ₹ 15,000 and to Capital Accounts ₹ 18,000.

Sonia and Rohit were partners in a firm sharing profits and losses in the ratio of 3 : 2. On 31st March, 2023 their Balance Sheet was as follows:

The firm was dissolved on the above date on the following terms:

1. Machinery Realised at 80% and furniture was realised at 60% less than book value.
2. Debtors of ₹ 5,000 proved bad and remaining debtors realised 90% only.
3. Creditors took away half of the stock in full settlement of their account.
4. Remaining stock realised ₹ 72,000.
5. Realisation expenses amounting to ₹ 14,000 were paid by Rohit.

Prepare Realisation Account.

Hints:

1. Building will be realised at book value and Bank Loan will be paid at book value.
2. There will be no entry for half of stock taken away by creditors in full settlement of their claim.

Pritam and Naresh decided to dissolve their firm on September 30, 2023, when their Balance Sheet stood as follows:

The assets were realised as follows:- Stock ₹ 20,000; Bills Receivable ₹ 3,800; Furniture ₹ 5,100; Plant & Machinery ₹ 35,000; Sundry Debtors at 10% less than book value.

Sundry Creditors allowed a discount of 5%. Pritam agreed to pay his wife’s loan. Naresh agreed to pay outstanding rent. Expenses on dissolution came to ₹ 800.

Pritam and Naresh shared profits and losses in the ratio of their Capitals. Accounts were finally settled.

Prepare Journal, Realisation Account, Capital Accounts and Bank Account.

Hint: Goodwill will be debited to Realisation A/c and no further entry will be made in respect of this item.

Mrs. Rita Chowdhary and Miss Shobha are partners in a firm, ‘Fancy Garments Exports’ sharing profits and losses equally. On 1st January, 2024, the Balance Sheet of the firm was as follows:

The firm was dissolved on the date given above. The following transactions took place:

1. Mrs. Rita Chowdhary undertook to pay Mr. Chowdhary’s Loan and took over 50 per cent of stock at a discount of 20 per cent.
2. Book-debts realised ₹ 54,000; balance of the stock was sold off at a profit of 30 per cent on cost.
3. Sundry Creditors were paid out at a discount of 10 per cent. Bills payable were paid in full.
4. Plant and Machinery realised ₹ 75,000 and Land and Buildings ₹ 1,20,000.
5. Mrs. Rita Chowdhary took over the goodwill of the firm at a valuation of ₹ 30,000.
6. Realisation expenses were ₹ 5,250.

Show the Realisation Account, Bank Account and Partner’s Capital Accounts in the books of the firm.

Anurag and Prem were partners sharing profits and losses in 2 : 1. On 31st March, 2020 their Balance Sheet was as follows:

The firm was dissolved on the above date:

1. Anurag took over 60% of the stock at a discount of 20%; 25% of the remaining stock was sold at a profit of 40% on cost; Remaining stock was found obsolete and realised nothing.
2. Firm had to pay ₹ 90,000 as compensation to workers.
3. Sundry Creditors took over investments in full settlement.
4. Sundry Debtors realised at 75% and plant realised 20% less.
5. Prem agreed to take over the responsibility of completing dissolution work and he was given furniture as his remuneration.
6. Realisation expenses amounted to ₹ 10,000.

Prepare Realisation Account.

Hints: 

(i) Book value of remaining 25% stock: 25% of 40,000 = 10,000

Realised value of stock: `10,000xx140/100` = ₹ 14,000

(ii) 

Workmen Compensation Reserve amounting to ₹ 30,000 will be transferred to the Cr. side of Capital Accounts.

(iii) There will be no entry of sundry creditors taking over the investments.

(iv) There will be no entry of Prem taking over furniture as his remuneration.

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

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. 

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

The profit and loss sharing ratios of the partners are 3 : 2 : 1. At the above date, partners decide to dissolve the firm. The assets realised were as follows:

1. Bills Receivable were realised at a discount of 5%. Debtors were all good; Stock realised ₹ 32,000. Land and Buildings realised at 40% higher than the book value.
2. Furniture was sold for ₹ 6,000 by auction and auctioneer’s commission amounted to ₹ 300.
3. Typewriters were taken over by A for an agreed valuation of ₹ 5,000.
4. Investments were sold in the open market at a price of ₹ 25,000, for which a commission of 2% was paid to the broker and Accrued Income could not be realised.
5. Creditors agreed to accept 10% less. All other liabilities were paid off at their book value.
6. The firm retrenched their employees three months before the dissolution of the firm and the firm had to pay ₹ 25,000 as compensation. This liability was not appearing in the above Balance Sheet.

Close the books of the firm by preparing Realisation Account, Partner’s Capital Accounts, and Bank Account.

Hint: Amount realised from Sundry Debtors: ₹ 40,000.

Following is the Balance Sheet of Ramji Lal and Panna Lal as at 31st March, 2024:

They decided to dissolve the firm. Assets are realised as follows:

1. Machinery 10% less than book value; Plant ₹ 12,500 and Goodwill ₹ 2,520.
2. Ramji Lal is to take over Debtors amounting to ₹ 6,800 at ₹ 6,000, remaining Debtors were realised for 90% of the book value.
3. One bill of ₹ 600 under discount having been dishonoured had to be taken up by them.
4. The Bill payable of ₹ 2,600 to be assumed by Panna Lal at that figure.
5. Creditors are paid off at a discount of 10%.
6. An amount of ₹ 2,500 had to be paid for Workmen Compensation.
7. The liquidation expenses amounted to ₹ 400.

You are required to show the Realisation Account, Capital Accounts and Bank Account.

Hint: Entire amount of Workmen Compensation Reserve of ₹ 2,000 will be Credited to Realisation Account.

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

The firm was dissolved on 31st March, 2022 on the following terms:

1. A promised to pay off Mrs. A’s loan and took away stock-in-trade at ₹ 4,000;
2. B took away half of the investments at 10% discount;
3. Debtors realised ₹ 19,000;
4. Creditors and bills payable were due on an average basis of one month after 31st March, but they were paid immediately on 31st March, at 6% discount per annum;
5. Plant realised ₹ 25,000, Building ₹ 40,000, Goodwill ₹ 6,000 and remaining investments at ₹ 4,500.
6. There was an old typewriter in the firm which had been written off completely from the books. It is now estimated to realise ₹ 300. It was taken away by B at this estimated price;
7. Realisation expenses were ₹ 1,000.

Prepare the necessary ledger accounts in the books of A and B.

Hints:

1. Discount received on payment to Creditors `30,000xx6/100xx1/12` = ₹ 150
2. Discount received on payment to B/P `8,000xx6/100xx1/12`= ₹ 40
3. A bank account has been prepared in the question. Cash in hand balance of ₹ 500 has been transferred to the debit of Bank A/c.

Sita and Gita were partners sharing profits and losses in the ratio of 4 : 5. They dissolved their partnership on 31st March, 2021, when their Balance Sheet showed the following balances:

On the date of dissolution:

1. The firm, upon realisation of assets and settlement of liabilities, made a profit of ₹ 9,000.
2. Gita paid the realisation expenses of ₹ 2,000.
3. Gita discharged the outstanding salary of the manager of the firm of ₹ 1,000 which was unrecorded in the books.

You are required to prepare the Partner’s Capital Accounts.

A, B and C are in partnership sharing in 4 : 3 : 3. They decided to dissolve the partnership firm. At the date of dissolution their creditors amounted to ₹ 16,800 and in the course of dissolution a contingent liability of ₹ 3,500 not brought into the accounts matured and had to be met. Their capitals stood at ₹ 12,000, ₹ 10,000 and ₹ 8,000 respectively. B had lent to the firm in addition to Capital ₹ 13,200. The assets realised ₹ 45,670.

Prepare the Realisation Account and partner’s Capital Accounts. Also show the Bank Account.

Ashok and Kishore were in partnership sharing profits in the ratio of 3 : 1. They agreed to dissolve the firm. The assets (other than cash of ₹ 2,000) of the firm realised ₹ 1,10,000. The liabilities and other particulars of the firm on that date were as follow:

Creditors were settled in full settlement at ₹ 38,000. Prepare Realisation and Cash Account.

On 1st April, 2023, A, B and C commenced business in partnership sharing profit and losses in proportion of `1/2, 1/3  "and"  1/6` respectively. They paid into their Bank A/c as their capital ₹ 22,000 being ₹ 10,000 by A, 7,000 by B and ₹ 5,000 by C. During the year they drew ₹ 5,000, being ₹ 1,900 by A, ₹ 1,700 by B and 1,400 by C.

On 31st March, 2024, they dissolved their firm. A taking up stock at an agreed valuation of ₹ 5,000, B taking up furniture at ₹ 2,000 and C taking up debtors at ₹ 3,000. After paying up their creditors, there remained a balance of 1,000 at Bank. Prepare the necessary accounts showing the distribution of the cash at the Bank and of the further cash brought in by any partner as the case required.

X, Y and Z entered into partnership on 1st October, 2021 sharing profits and losses in the proportions of 4 : 3 : 2, respectively, and with capitals of ₹ 30,000, ₹ 20,000 and ₹ 10,000.

Their assets and liabilities on 1st October, 2022, the date on which they decided to wind up their affairs, were as follows:

Office Fixtures ₹ 1,000; Debtors ₹ 28,000; Bills Receivable ₹ 5,000; and Stock-in-trade ₹ 45,000. Sundry creditors were ₹ 30,000; Bills Payable ₹ 4,000.

X agreed to take over the Stock-in-trade at a discount of 10% and pay off the Bills Payable.

Y agreed to take over the Book Debts at a discount of 20% and pay off the Creditors.

Z took over the Bills Receivable at ₹ 4,877 and Office Fixtures at a depreciation of 10%

5% p.a. interest is to be credited to each partner on his capital.

Prepare Realisation a/c and Capital a/cs of the partners and an account showing adjustment of profits or losses in the business.

Hint: Interest on Capital will not be allowed, because there is loss in the business.

P, Q and R started business on 1st April, 2023. They shared profit and loss in the ratio of 2 : 2 : 1. Capitals contributed by them were P ₹ 40,000; Q ₹ 30,000 and R ₹ 20,000. The partners were entitled to interest on capital @ 6% p.a.

During the year the firm earned a profit (before interest) of ₹ 25,000. The partners had withdrawn P ₹ 10,000; Q ₹ 8,000 and R ₹ 5,000.

On 31st March, 2024 the firm was dissolved. The assets realised ₹ 1,00,000. The creditors of ₹ 15,000 were paid at a discount of 3%. Expenses incurred on realisation were ₹ 1,450.

Prepare Partner’s Capital Accounts, Realisation Account, Cash Account, Profit and Loss Appropriation Account and Balance Sheet to close the books of the firm.

A, B and C were partners from 1st April 2022 with capitals of ₹ 3,00,000; ₹ 2,00,000 and ₹ 1,50,000 respectively. They shared profits in the ratio of 2 : 2 : 1. They carried on business for two years. In the first year ending on 31st March, 2023, they made a profit of ₹ 2,00,000 but in the second year ending on 31st March, 2024, a loss of ₹ 60,000 was incurred. As the business was no longer profitable they dissolved the firm on 31st March, 2024. Creditors on that date were ₹ 75,000. The partners withdrew for personal use ₹ 40,000 per partner per year. The assets realised ₹ 4,00,000. The expenses of realisation were ₹ 5,000.

Prepare Realisation Account and show your workings clearly.

Following is the Balance Sheet of Deepak and Jyoti, who were sharing profit and losses in the ratio of 3 : 2, as at March 31, 2024:

The firm was dissolved on that date and the following arrangements were made:

1. Assets realised as follows: Debtors ₹ 18,000; Furniture ₹ 5,500; Plant ₹ 32,000.
2. Deepak agreed to take over stock in full settlement of his wife’s loan.
3. Creditors were paid at 2% discount and Bank Loan was discharged along with interest due for six months @ 10% p.a. and
4. Expenses of realisation amounted to ₹ 1,800.

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

Hint: There will be no entry for the payment of Mrs. Deepak’s Loan.

A, B and C sharing profits in the proportion of 3 : 2 : 1 agreed upon dissolution of their partnership firm on 31st March, 2024 at which date their balance sheet was as under:

The investments are taken over by A for ₹ 17,500. A agrees to discharge his wife’s loan. B takes over all the Stock at ₹ 7,000 and debtors amounting to ₹ 5,000 at ₹ 4,000. Machinery is sold for ₹ 67,000. The remaining debtors realise 50% of book value. The expenses of realisation amount to ₹ 600.

It is found that an investment not recorded in the books is worth ₹ 3,000 and it is taken over by one of the creditors at this value. Accrued Income could not be realised.

Show the necessary ledger accounts on completion of the dissolution of firm.

Hints: C’s Current A/c appears on the assets side, which means that it has a debit balance. As such, it will be transferred to the Debit side of C’s Capital Account.

Mehta and Menon were partners in a firm, sharing profits and losses in the ratio of 7 : 3.

They decided to dissolve their partnership firm on 31st March, 2016. On that date, their books showed the following ledger account balances:

Additional Information:

1. Bills Payable falling due on 31st May, 2016 were retired on the date of dissolution of the firm, at a rebate of 6% per annum.
2. The bankers accepted the furniture (included in sundry assets) having a book value of ₹ 18,000 in full settlement of the loan given by them.
3. Remaining assets were sold for ₹ 1,50,000.
4. Liability on account of outstanding salary not recorded in the books, amounting to ₹ 15,000 was met.
5. Menon agreed to take over the responsibility of completing the dissolution work and to bear all expenses of realization at an agreed remuneration of ₹ 2,000. The actual realization expenses were ₹ 1,500 which were paid by the firm on behalf of Menon.

You are required to prepare:

1. Realisation Account, and
2. Partner’s Capital Accounts.

Hints:

1. There will be no entry for payment of Bank Loan.
2. Entry for remuneration and realisation expenses:
   

   Realisation A/c    ...Dr.	2,000	-
   To Menon’s Capital A/c	-	500
   To Cash A/c	-	1,500

X, Y and Z were in partnership sharing profits and losses in the ratio of 7 : 2 : 1 and the Balance Sheet of the firm stood at 31st March, 2024, as under:

On 31st March, 2024, it was decided to dissolve the firm on the following terms:

1. X is to take over the buildings at ₹ 7,300.
2. Y, who will continue with business, to take over Goodwill, Stock and Debtors at book values, Patents at ₹ 6,500 and Machinery at ₹ 1,500. He also agreed to pay the Creditors.
3. Z agreed to take the shares in C Co. Ltd. at ₹ 5 each.
4. The shares in B Co. Ltd. to be divided in profit sharing ratio.

Show the ledger accounts to record the dissolution.

Following is the balance sheet of P, Q and R who were sharing profits and losses in the ratio of 3 : 2 : 1.

The firm was dissolved on that date and the following arrangements were made:

1. Assets realised as follows: Debtors ₹ 15,000; Plant at 30% discount.
2. Stock was valued at ₹ 36,000 and this was taken over by P and Q equally.
3. Market value of the shares of A Ltd. is ₹ 16 per share. Half the shares were sold in the market and the balance half were taken over by P and Q in their profit sharing ratio.
4. A creditor for ₹ 50,000 took over Motor Car in full settlement of his claim and the balance of creditors were paid at a discount of 2%.
5. Expenses of realisation amounted to ₹ 6,000. P agreed to discharge his wife’s Loan.

Prepare Journal entries and Ledger accounts.

P, Q and R were partners in a firm sharing profits in the ratio of 1 : 2 : 2. Their Balance Sheet as at 31st March, 2024 was as follows:

Partners agreed to dissolve the firm on that date. You are given the following information about dissolution:

1. One of the Debtors for ₹ 20,000 paid ₹ 12,000 in full settlement of his account and debtors of ₹ 5,000 were proved bad.
2. Part of the stock was sold for ₹ 20,000 (being 25% more than the book value).
3. Office Equipment was accepted by the creditor for ₹ 7,000 in full settlement. Another creditor of ₹ 40,000 was paid only 40% in full settlement of his account and remaining creditors accepted remaining stock in full settlement of their account.
4. An unrecorded asset of ₹ 20,000 was handed over to an unrecorded liability of ₹ 15,000 in full settlement.
5. Land & Buildings were sold at a loss of 20%
6. Q’s Loan was settled by payment of ₹ 30,000.
7. Realistion expenses ₹ 16,000 were paid by R.

You are required to prepare the necessary accounts.

Hints:

1. There will be no entry for unrecorded asset given to unrecorded liability.
2. Entry for payment of Q’s Loan will be:
   

   Q’s Loan A/c   ...Dr.	40,000	-
   To Bank A/c	-	30,000
   To Realisation A/c	-	10,000

A, B and C were partners in a firm sharing profits & losses in the ratio of 2 : 2 : 1. The Balance Sheet of the firm at the date of dissolution was as follows:

You are informed that:

1. They appointed B to realise the assets. He is to receive 5% of the amounts realised from Debtors, Stock and Machinery, and is to bear all expenses of realisation.
2. Bad Debts amounted to ₹ 2,000; Stock realised ₹ 36,000 and Machinery realised ₹ 46,000. There was an unrecorded asset of ₹ 10,000 which was taken over by A at ₹ 8,000.
3. Market value of Investments was ascertained to be ₹ 20,000, and one of the creditors agreed to accept the Investments at this value. Remaining creditors were paid at a discount of ₹ 6,000.
4. An office typewriter, not shown in the books of accounts, realised ₹ 20,000.
5. There were outstanding expenses amounting to ₹ 6,000. These were settled for ₹ 4,500. Expenses of realisation met by B amounted to ₹ 2,000.

Prepare necessary accounts.

A, B and C were in partnership sharing profit and losses in the ratio of 1 : 2 : 2. Their Balance Sheet at 31st March, 2024 was as under:

C died on 1st April, 2024 and it was decided to dissolve the firm. The following transactions took place:

1. An unrecorded asset was realised for ₹ 50,000.
2. B took over half the investments at 10% discount and C took over Bills Receivable at 20% discount.
3. Stock realised as follows:
   60% of the stock was realised in full.
   10% of the stock was realised at a discount of 20%
   Remaining stock was realised at a profit of 20%.
4. Building realised ₹ 2,50,000; Debtors ₹ 20,000; Goodwill Nil and remaining investments ₹ 10,000.
5. Discount of ₹ 1,600 was allowed by creditors.
6. A contingent liability, not brought into the account, was settled for ₹ 2,000.

You are required to prepare necessary accounts.

Hint: Stock realised ₹ 41,600.

A, B and C are partners sharing profits and losses in the ratio of 4 : 2 : 1. On 31st March, 2024, their Balance Sheet was as follows:

It was decided to dissolve the firm, A agreeing to take over the business (except Cash at Bank) at the following valuations:

Leasehold Premises at ₹ 60,000

Plant and Machinery at ₹ 12,000 less than the book value.

`1/4` th stock at 33`1/3`% more than its book value.

Remaining Stock at 20% more than the book value.

Sundry Debtors subject to a provision of 5%.

Mrs. B’s Loan was paid in full and the creditors were proved at ₹ 32,000 and were taken over by A. Expenses of dissolution came to ₹ 900.

Prepare necessary accounts to close the books of the firm and prepare the Balance Sheet of A.

Give journal entries in each of the following alternative cases on the dissolution of a firm:

1. Realisation expenses paid by X on behalf of the firm.
2. Realisation expenses paid by the firm ₹ 1,000. However, the expenses were to be borne by partner X for which he was to be given a commission of 5% on net cash realised on dissolution. Cash realised from assets was ₹ 2,00,000 and cash paid for liabilities was ₹ 40,000.
3. General Reserve appearing in the balance sheet was ₹ 20,000.
4. Sundry Creditors amounted to ₹ 15,000. These were paid at a discount of 2%.

Jain, Sharma and Verma were partners in a firm sharing profits in the ratio of 1 : 2 : 1. On 31st March, 2018 their firm was dissolved. It was agreed that Sharma will look after the dissolution work and will be paid ₹ 15,000 as remuneration. The dissolution expenses were ₹ 5,000. ₹ 2,84,000 were paid to the creditors in full settlement of their claim of ₹ 3,00,000. Dissolution of the firm resulted into a loss of ₹ 18,000.

Pass necessary journal entries for the above transactions.

Gaurav, Saurabh, and Vaibhav were partners in firm sharing profits and losses in the ratio of 2 : 2 : 1. They decided to dissolve the firm on 31^st March 2018. After transferring Sundry assets (other than cash in hand and cash at Bank) and third-party liabilities to realisation account, the assets were realized and liabilities were paid off as follows:

1. A machinery with a book value of ₹ 6,00,000 was taken over by Gaurav at 50% and stock worth ₹ 5,000 was taken over by a creditor of ₹ 9,000 in full settlement of his claim.
2. Land and building (book value ₹ 3,00,000) were sold for ₹ 4,00,000 through a broker who charged 2% commission.
3. The remaining creditors were paid ₹ 76,000 in full settlement of their claim and the remaining assets were taken over by Vaibhav for ₹ 17,000.
4. Bank loan of ₹ 3,00,000 was paid along with interest of ₹ 21,000.

Pass necessary journal entries for the above transactions in the books of the firm.

Adiraj and Karan were partners in a firm sharing profits and losses in the ratio 3 : 2. On 31st March, 2018 the firm was dissolved. After the transfer of assets (other than cash in hand and at bank) and third party liabilities to the Realisation Account, the following information was provided:

1. Furniture of ₹ 70,000 was sold for ₹ 68,000 by auction and auctioneer’s commission amounted to ₹ 2,000.
2. Adiraj’s loan amounting to ₹ 35,000 was settled at ₹ 37,500.
3. Out of the stock of ₹ 80,000, Karan took over 50% of the stock at a discount of 20% while the remaining stock was sold off at a profit of 30% on cost.
4. A bills receivable of ₹ 3,000 under discount was dishonoured as the acceptor had become insolvent and hence the bill had to be met by the firm.
5. Realization expenses amounted to ₹ 2,000 which were paid by Adiraj.

Pass the necessary journal entries for the above transactions on the dissolution of the firm.

Give the necessary journal entries for the following transactions on dissolution of the firm of Aman and Rajat on 31st March, 2016, after the transfer of various assets (other than cash) and the third party liabilities to Realisation Account. They shared profits and losses in the ratio of 2 : 1.

1. There was a bill of exchange of ₹ 10,000 under discount. The bill was received from Derek who became insolvent.
2. Bills Payable of ₹ 30,000 falling due on 30th April, 2016 was discharged at ₹ 29,550.
3. Creditors of ₹ 30,000 took over stock of ₹ 10,000 at 10% discount and the balance was paid to them in cash.
4. There was an old typewriter which had been written off completely. It was estimated to realize ₹ 600. It was taken away by Rajat at 25% less than the estimated price.
5. Aman agreed to take over the responsibility of completing dissolution at an agreed remuneration of ₹ 1,000 and to bear all realization expenses. Actual realisation expenses ₹ 800 were paid by the firm.

Disha, Mohit and Nandan are partners. They decide to dissolve their firm. Pass necessary Journal Entries for the following after various Assets (other than Cash and Bank) and the third party liabilities have been transferred to Realisation Account:

1. An old typewriter which was not recorded in the books was sold for ₹ 2,000 whereas its expected value was ₹ 5,000.
2. Stock of ₹ 70,000 was taken by Disha at a discount of 30%.
3. Total creditors of the firm were ₹ 20,000. A creditor for ₹ 2,000 was untraceable and other creditors accepted payment allowing 10% discount.
4. Mohit paid realisation expenses of ₹ 18,000 out of his private funds, who was to get remuneration of ₹ 13,000 for completing the dissolution process and was responsible to bear all the realisation expenses.
5. Nandan had taken a loan of ₹ 50,000 from the firm, which was paid fully by him to the firm.
6. ₹ 12,000 was recovered from a debtor which was written off as Bad debts last year.

Angad, Raman and Harshit were partners in a firm. They decided to dissolve their firm. Pass necessary journal entries for the following after various assets (other than cash and bank) and the third party liabilities have been transferred to Realisation Account:

1. There was a stock of ₹ 90,000. Raman took over 50% of the stock at 10% discount and remaining stock was sold at 40% profit on book value.
2. Profit and Loss A/c was showing a debit balance of ₹ 15,000 which was distributed among the partners.
3. A machinery which was not recorded in the books was sold for ₹ 2,000.
4. Angad was paid only ₹ 5,000 (in full settlement) for his loan to the firm which amounted to ₹ 5,500.
5. Realisation expenses amounting to ₹ 5,000 paid by Harshit.
6. There were 100 shares of ₹ 10 each in DCM Ltd. acquired at a cost of ₹ 1,200 which had been written off completely from the books. These shares are valued at ₹ 9 each and divided among the partners in their profit sharing ratio.

X and Y are partners. They decided to dissolve their firm. Pass necessary entries assuming that various assets and external liabilities have been transferred to Realisation Account:

1. X’s loan was appearing on the liabilities side of Balance Sheet at ₹ 40,000. He accepted an unrecorded asset of ₹ 60,000 in full settlement of his account.
2. There was an unrecorded asset estimated at ₹ 20,000, half of which was handed over to an unrecorded liability of ₹ 30,000 in settlement of a claim of ₹ 18,000 a remaining half was sold in the market at 80% of its value.
3. Raman, a Creditor to whom ₹ 25,000 were due to be paid, accepted an unrecorded computer of ₹ 18,000 at a discount of 10% and the balance was paid to him in Cash.
4. Sudhir, an unrecorded creditor of ₹ 40,000 accepted an unrecorded vehicle of ₹ 20,000 at ₹ 25,000 and the balance was paid to him in Cash.
5. There was a Contingent liability in respect of bill discounted but not matured ₹ 20,000.
6. Furniture of ₹ 20,000 and goodwill of ₹ 30,000 were appearing in the Balance Sheet but no other information was provided regarding these two items.

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:

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 ₹ 7,500 for an outstanding repair bill not provided for earlier.
5. A contingent liability in respect of bills receivable, discounted with the bank had also materialised and had to be discharged for ₹ 15,000.
6. Expenses of realisation amounting to ₹ 3,000 were paid by Srijan.

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

The following is the Balance Sheet of X and Y as at 30th June, 2022.

The firm was dissolved on 30th June, 2022 and the following arrangements were decided upon:

1. X agreed to pay off his brother’s loan;
2. Debtors realised ₹ 12,000;
3. Y took over all the investments at ₹ 12,000.
4. Other assets realised as follows:
   Plant - ₹ 20,000, Building - ₹ 50,000, Goodwill - ₹ 6,000
5. Sundry Creditors and bills payable were settled at 5% discount, Y accepted Stock at ₹ 8,000 and X took over Bills Receivable at 20% discount.
6. Realisation Expenses amounted to ₹ 2,000.

You are required to pass Journal Entries.

A and B were partners from 1.4.2022 with capitals of ₹ 60,000; ₹ 40,000 respectively. They shared profits in the ratio of 3 : 2. They carried on business for two years. In the first year ending on 31.3.2023, they made a profit of ₹ 50,000 but in the second year ending on 31.3.2024, a loss of ₹ 20,000 was incurred. As the business was no longer profitable they dissolved the firm on 31.3.2024. Creditors on that date were ₹ 20,000. The partners withdrew for personal use ₹ 8,000 per partner per year. The assets realised ₹ 1,00,000. The expenses of realisation were ₹ 3,000.

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

A and B have been in business together for the last three years ending 31st March, 2024 at which date they agree to dissolve. Their capital at the commencement of the business was ₹ 30,000 and ₹ 20,000 respectively. Profits and Losses were shared in the ratio of 3 : 2. The results of the three years before allowing 10% p.a. interest on capital were: 31-3-2022 profit ₹ 30,000, 31-3-2023 profit ₹ 22,200 and 31-3-2024 loss ₹ 5,380. Drawings of each partner is ₹ 4,000 per year. Creditors on the date of dissolution were ₹ 16,400. The assets realised ₹ 85,000. Expenses of dissolution amounted to ₹ 780.

Prepare:

1. Profit and Loss Appropriation Account
2. Capital Accounts before and after dissolution
3. Memorandum Balance Sheet
4. Bank A/c
5. Realisation Account

Bale and Yale are equal partners of a firm, the Balance Sheet of which is given below as at 31.3.2024, the date on which they decide to dissolve the firm.

1. The assets realised were as follows:
   Stock ₹ 22,000; Debtors ₹ 7,500; Machinery ₹ 6,000.
2. Bale agreed to accept ₹ 2,500 in full settlement of his loan account.
3. Yale took over the furniture at ₹ 9,000.
4. Dissolution expenses amounted to ₹ 2,500.

Prepare:

1. Realisation Account
2. Capital Accounts of Partners
3. Bale’s Loan Account
4. Bank Account

Hints:

1. Building will be realised at book value.
2. Entry for payment of Bale’s Loan will be:
   

   Bale’s Loan A/c    ...Dr.	3,000	-
   To Bank A/c	-	2,500
   To Realisation A/c	-	500

Sanjay and Sameer were partners in a firm sharing profits in the ratio of 2 : 3. On 31.3.2024 their Balance Sheet was as follows:

The firm was dissolved on 1.4.2024 and the assets and liabilities were settled as follows:

1. Sanjay agreed to take over land and building at ₹ 3,50,000 by paying cash;
2. Stock was sold for ₹ 90,000;
3. Creditors accepted Debtors in full settlement of their claim.

Pass necessary journal entries for dissolution of the firm.

Hints:

1. Prepare Realisation A/c in working notes. Loss on Realisation will be ₹ 5,000.
2. Workmen Compensation Reserve will be credited to Partner’s Capital Accounts.
3. There will be no entry for Creditors taking over Debtors in full settlement.

Arun, Tarun and Varun shared profits in the ratio of 2 : 2 : 1. On 31.12.2023 their Balance Sheet was as follows:

On this date the firm was dissolved. Arun was appointed to realise the assets. Arun was to receive 5% commission on the sale of assets (except cash) and was to bear all expenses of realisation.

Arun realised the assets as follows:

Stock ₹ 36,000, Debtors ₹ 45,000, Investments 80% of the book value, Plant ₹ 65,500. Expenses of realisation amounted to ₹ 5,500. Commission received in advance was returned to the customers after deducting ₹ 4,000. Firm had to pay ₹ 8,000 for outstanding wages. This liability was not provided for in the above Balance Sheet. ₹ 20,000 had to be paid for provident fund.

Prepare Realisation Account, Capital Accounts and Cash Account.

Hint: There will be no entry for the expenses of realisation, as these will be met by Arun personally.

A, B and C sharing profits and losses in the ratio of 3 : 2 : 1 agreed to dissolve their partnership firm on 31st March, 2024. A was asked to realise the assets and pay off liabilities. He had to bear the realisation expenses for which he was promised a lump sum amount of ₹ 3,000. Their financial position as at that date was as follows:

Informations:

1. Stock was valued at ₹ 40,000 and this was taken over by A and B equally. Lease realised ₹ 1,10,000; Equipments at ₹ 18,000; and Accounts Receivable at ₹ 20,000 and other assets proved valueless.
2. Actual realisation expenses paid by A amounted to ₹ 1,800.
3. There was an unrecorded asset of 10,000 which was taken over by A at ₹ 12,000.
4. A bill of ₹ 3,200 due for sales tax was received during the course of realisation and this was also paid.
5. Sunil, an old customer whose account was written off as bad in the previous year, paid ₹ 2,500 which is not included in the above stated accounts receivable.
6. Market value of the Shares in X Ltd. is ₹ 100 per share. Half the shares were sold in the market subject to a commission of 2% and the balance half were divided by all the partners in their profit sharing ratio.

Prepare necessary accounts.

Hints:

(1) 

(2) No entry need to be passed for realisation expenses off ₹ 1,800 paid by A.

Only the following entry may be passed for ₹ 3,000 promised to be paid to A:

(3) Accounts Payable, Mortgage Loan, Advance from B and Employees’ Saving Bank will be paid in full.

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

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:

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

A and B shared profits in the ratio of 7 : 3. They dissolved the firm and appointed A to realise the assets. A is to receive 6% commission on the amount realised from Stock, Debtors, B/R and Shares. 

The position of the firm was as follows:

Informations:

1. A realised the assets as follows: Full amount from Sundry Debtors and B/R except from one for ₹ 2,000 being insolvent. Stock realised ₹ 52,000; Shares in D.C.M. were sold for ₹ 60 each.
2. Half the trade creditors accepted plant and machinery at an agreed valuation of 10% less than the book value and cash of ₹ 7,000 in full settlement of their claims.
3. Remaining creditors were paid off at a discount of 10%. Expenses of realisation amounted to ₹ 700.
4. One quarter’s tax amounting to ₹ 1,500 was due and had to be paid.
5. There was a contingent liability amounting to ₹ 13,000. It was settled for ₹ 6,000.
6. Bank Loan was discharged along with interest due for two months @ 18% p.a.

Prepare necessary accounts.

Hints:

1. Creditors for ₹ 30,000 accept Plant and Machinery at ₹ 18,000 and Cash ₹ 7,000. The balance of ₹ 5,000 will be treated as discount. Remaining Creditors of ₹ 30,000 are paid ₹ 27,000 in full settlement. Hence, the total Cash paid to Creditors = ₹ 7,000 + ₹ 27,000 = ₹ 34,000
2. Commission paid to A (For sale of assets) 6% on ₹ 1,00,000 = ₹ 6,000.
3. Repairs and Renewals Reserve will be transferred to the Credit side of Capital A/cs.

A, B and C are equal partners in a firm. The Balance Sheet of the firm at the date of dissolution was as follows:

B was appointed to realise the assets and pay the liabilities. He was entitled to receive 10% commission on the amounts finally paid to other partners as capital. He was also to bear the expenses of realisation.

You are informed that:

1. An old typewriter, written off completely from the firm’s books, is now estimated to realise ₹ 1,400. It is taken over by B at this estimated price.
2. A agreed to accept furniture in full settlement of his wife’s loan.
3. Assets realised as follows: Lease ₹ 1,00,000; Plant at ₹ 36,000; Stock ₹ 12,000; ₹ 8,000 of the book debts proved bad.
4. Expenses of realisation amounted to ₹ 800.
5. Creditors accepted patent rights at a discount of 20% in part satisfaction of their claim. Out of their balance they were paid 50% in full satisfaction.
6. The partnership had previously purchased some shares at ₹ 20,000 in a public limited company and had written them off as worthless. These shares were taken over by B at ₹ 4,000.

Prepare necessary accounts.

Hints:

(1) 

(2) There will be no entry for the payment of realisation expenses and A’s Wife Loan. Creditors will be paid only ₹ 8,000.

(3) Provision for Depreciation on Plant will be Credited to Realisation A/c and no further entry will be passed for it.

Ravi and Mukesh were partners in a firm sharing profit and losses equally. On 31st March, 2019 their firm was dissolved. On the date of dissolution their Balance Sheet showed stock of ₹ 60,000 and creditors of ₹ 70,000. After transferring stock and creditors to realisation account the following transactions took place:

1. Ravi took over 40% of total stock at 20% discount.
2. 30% of total stock was taken over by creditors of ₹ 20,000 in full settlement.
3. Remaining stock was sold for cash at a profit of 25%.
4. Remaining creditors were paid in cash at a discount of 10%.

Pass necessary journal entries for the above transactions in the books of the firm.

Pass the necessary journal entries for the following transactions on the dissolution of the partnership firm of Tony and Rony after the various assets (other than cash) and external liabilities have been transferred to Realization Account:

1. An unrecorded asset of ₹ 2,000 and cash ₹ 3,000 was paid for liability of ₹ 6,000 in full settlement.
2. 100 shares of ₹ 10 each have been taken over by partners at market value of ₹ 20 per share in their profit sharing ratio, which is 3 : 2.
3. Stock of ₹ 30,000 was taken over by a creditor of ₹ 40,000 at a discount of 30% in full settlement.
4. Expenses of realisation ₹ 4,000 were to be borne by Rony. Rony used the firm’s cash for paying these expenses.

Mike and Ajay are partners sharing profits and losses in proportion to their capitals, which on 31st March, 2019, stood at ₹ 6,00,000 and ₹ 4,00,000 respectively. On this date, the firm had ₹ 1,00,000 in its Workmen Compensation Reserve and its outside liabilities amounted to ₹ 6,00,000, which included Creditors of ₹ 2,00,000 and Bills Payable of ₹ 60,000.

The firm was dissolved on 31st March, 2019, on which date, the assets, apart from Cash of ₹ 70,000, realised ₹ 14,00,000 and the liabilities were discharged as follows:

1. Creditors due on 31st May, 2019, were paid off at a discount of 3% per annum.
2. Bills Payable were discharged at a rebate of ₹ 1,000.
3. Workmen Compensation Claim of ₹ 40,000 was met.
4. Expenses of dissolution amounting to ₹ 30,000 were paid.

You are required to prepare:

1. Realisation Account.
2. Partner’s Capital Accounts.

In which condition a partnership firm is deemed to be dissolved?

The court can make an order to dissolve the firm when ______.

On dissolution of a firm, realisation account is debited with ______.

On dissolution of a firm, out of the proceeds received from the sale of assets ______ will be paid first of all.

At the time of dissolution of the firm, “Loan of partners” (Loans given by partners to the firm) is paid out of the amount realised on the sale of assets:

At the time of dissolution of the firm, at which stage the balance of the partner’s capital accounts is paid?

On firm’s dissolution, which one of the following account should be prepared at the last?

In the event of dissolution of a partnership firm, the provision for doubtful debts is transferred to ______.

Unrecorded liability, when paid on dissolution of a firm is debited to ______.

On dissolution of a partnership firm, profit or loss on realisation is distributed among the partners ______.

On dissolution of the firm, the amount received from the sale of the unrecorded asset is credited to ______.

Realisation A/c is a ______.

In the event of dissolution of the firm, the partner’s assets are first used for payment of the following:

A partnership firm is compulsorily dissolved:

On dissolution, goodwill account is transferred to ______.

At the time of dissolution of partnership firm, fictitious assets are transferred to ______.

At the time of dissolution of partnership firm, the amount of ‘Bills Payable’ shown in the Liabilities Side of the Balance Sheet is transferred to ______.

On dissolution, the final balance of the partner’s capital account are transferred to ______.

Change in the existing agreement between the partners is called ______.

On dissolution of a firm, a partner paid ₹ 700 for the firm’s realisation expenses. Which account will be debited?

On taking responsibility for payment of realisation expenses by a partner, the account credited will be ______.

On dissolution of the firm, loss calculated in realisation account is debited/credited to which account?

Which of the following is transferred to realisation account:

Which of the following is not transferred to Realisation Account:

On taking responsibility for payment of a liability of ₹ 50,000 by a partner, the account credited will be ______.

Cash balance shown in the balance sheet is shown on dissolution of firm in ______.

On firm’s dissolution, on realisation of goodwill (which was shown in balance sheet) will be credited to ______.

On dissolution of a firm, its Balance Sheet revealed total creditors ₹ 50,000; Total Capital ₹ 48,000; Cash Balance ₹ 3,000. Its assets were realised at 12% less. Loss on realisation will be ______.

On firm’s dissolution, when a partner voluntarily gives his personal asset to firm’s creditor as payment, the account credited will be:

On dissolution, when a partner takes over an unrecorded asset ______ is credited. 

On dissolution, when a partner takes over an asset ______ is debited.

In case of dissolution, assets are transferred to Realisation Account:

On dissolution, the balance of a partner’s capital account appearing on the assets side of a balance sheet is transferred to ______.

There was an unrecorded asset of ₹ 2,000 which was taken over by a partner at ₹ 1,500. partner’s capital account will be debited by ______.

On dissolution of a firm, an unrecorded furniture of the value of ₹ 5,000 was taken up by a partner for ₹ 4,300. Which account will be credited and by how much amount?

On the basis of following data, final payment to a partner on firm’s dissolution will be made:

Debit balance of Capital Account ₹ 14,000; Share of his profit on realisation ₹ 43,000; Firm’s asset taken over by him for ₹ 17,000.

When a partnership firm dissolves, its losses including deficiencies of capital are to be paid first out of ______.

______ is prepared at the time of dissolution.

While transferring assets to realisation account ______ is omitted to be transferred.

On the date of dissolution, the firm had debtors amounting to ₹ 3,00,000 and provision for doubtful debts of ₹ 30,000. Debtors for ₹ 20,000 proved bad and the remaining debtors realised 90%. Amount realised from the debtors will be: 

P, a partner, is to bear all expenses of realisation for which he is to be paid ₹ 2,000. P had to pay realisation expenses of ₹ 2,500. How much amount will be debited to Realisation Account?

Investments valued ₹ 2,00,000 were not shown in the books. One of the creditors took over these investments in full satisfaction of his debt of ₹ 2,20,000. How much amount will be deducted from creditors?

If creditors are ₹ 25,000, capital is ₹ 1,50,000 and cash balance is ₹ 10,000, what will be the amount of sundry assets?

If opening capitals of partners are A ₹ 3,00,000, B ₹ 2,00,000 and C ₹ 1,00,000 and their drawings during the year are A ₹ 50,000, B ₹ 40,000 and C ₹ 30,000 and creditors are ₹ 60,000, what will be the amount of assets of the firm?

If total assets of a firm are ₹ 12,00,000 and total liabilities are ₹ 2,40,000, what will be the capitals of P, Q and R if they share profits in the ratio of their capitals and profit sharing ratio is 1 : 2 : 3:

On dissolution of a firm, a partner’s capital account has a credit balance of ₹ 42,000. His share of profit in realisation account is ₹ 9,000. He has paid firm’s realisation expenses 3,000. He will finally get a payment of:

On dissolution of firm, which item is debited to the realisation account?

At the time of dissolution of a firm, Creditors are ₹ 70,000; Partner’s capital is ₹ 1,20,000; Cash Balance is ₹ 10,000. Other assets realised ₹ 1,50,000. Profit/Loss in the realisation account will be:

On dissolution of a firm, debtors ₹ 17,000 were shown in the Balance Sheet. Out of this ₹ 2,000 became bad. One debtor became insolvent. 70% were recovered from him out of ₹ 5,000. Full amount was recovered from the balance debtors. On account of this item, loss in realisation account will be:

X; Y and Z are partners in a firm in the ratio of 4 : 3 : 2. On firm’s dissolution, firm’s total assets are ₹ 70,000, creditors are ₹ 15,000. Realisation expenses are ₹ 2,100. Assets realised 15% more than the book-value. Creditors were paid 2% more. For profit/loss on realisation, Y’s capital account will be debited/credited with:

On dissolution of a firm, firm’s Balance Sheet total is ₹ 77,000. On the assets side of the Balance Sheet items were shown preliminary expenses ₹ 2,000; Profit & Loss Account (Debit) Balance ₹ 4,000 and Cash Balance ₹ 1,800. Loss on realisation was ₹ 6,300. Total assets (including cash balance) realised will be:

On dissolution of a firm, partner’s capital accounts balance was ₹ 63,000; creditors balance was ₹ 12,000 and profit & loss account debit balance was ₹ 6,000. Profit on realisation of assets was ₹ 7,800. Total amount realised from assets was:

Which of the following is not transferred to Realisation Account?

Which of the following does not result into reconstitution of a partnership firm?

Rohan, Mohan and Sohan were partners sharing profits equally. At the time of dissolution of the partnership firm, Rohan’s loan to the firm will be:

In which condition a partnership is considered to be dissolved:

At the time of Dissolution of a partnership firm, if a partner’s loan to the firm is discharged by giving an unrecorded asset, which of the following entries will be passed?

At the time of Dissolution of a partnership firm, if the Realization expenses are supposed to be borne by a partner ‘A’ but are paid by another partner ‘B’. Which of the following entries will be passed?

At the time of dissolution of a firm, Creditors are ₹ 70,000; Firm’s Capital is ₹ 1,20,000; Cash Balance is ₹ 10,000. Other assets realised ₹ 1,50,000. Gain/Loss in the realisation account will be:

Mita and Rita decided to dissolve their partnership firm. Their books showed Goodwill of ₹ 5,000.

How will the Goodwill Account be closed on the dissolution of the firm?

Which of the following will be transferred to Realisation Account at the time of dissolution of firm?

1. Provision for Doubtful Debts
2. Partner’s Loan
3. General Reserve
4. Goodwill

Mehak and Ravish were partners in a firm. On dissolution of the firm, the loan given by Mehak to the firm was ₹ 30,000, by Ravish was ₹ 15,000, and by Mrs. Ravish was ₹ 10,000. The first payment will be made for:

On dissolution of the firm of Ramesh, Suresh and Naresh, Naresh had agreed to bear all realisation expenses for which he was to be paid ₹ 14,500. Actual expenses on realisation amounted to ₹ 11,000 which were paid by Naresh. The amount to be credited to Naresh’s capital account will be:

On dissolution of a partnership firm, furniture appearing in the Balance Sheet was ₹ 2,00,000. 50% of the furniture was taken over by a partner at ₹ 65,000 and balance 50% was sold at 20% less than the book value. The amount debited to bank account was:

On the day of dissolution of the firm ‘Roop Brothers’ had partner’s capital amounting to ₹ 1,50,000 external liabilities ₹ 35,000, Cash balance ₹ 8,000 and P & L A/c (Dr.) ₹ 7,000. If Realisation expense and loss on Realisation amounted to ₹ 5,000 and ₹ 25,000 respectively, the amount realised by sale of assets is ______.

On the dissolution of the firm, Partner Rex agreed to take over the responsibility of completing the dissolution work at an agreed remuneration of ₹ 1000 and to bear all realisation expenses. The actual realisation expenses amounted to ₹ 1,300 which were paid by the firm on Rex’s behalf.

What amount will be debited by the firm to the Realisation Account?

At the time of dissolution, Harry, a creditor of the firm agreed to take over the furniture of the book value of ₹ 1,00,000 at ₹ 89,000 and the balance in cash in full settlement of his account of ₹ 1,10,000.

Which journal entry will be passed for the balance to be paid in cash?

At the time of dissolution of a firm, the total assets were ₹ 6,00,000 and outside liabilities were ₹ 2,40,000. If assets realised ₹ 7,20,000 and realisation expenses of ₹ 8,000 were paid, the profit or loss on realisation will be:

At the time of dissolution Machinery appears at ₹ 10,00,000 and accumulated depreciation for the machinery appears at ₹ 6,00,000 in the balance sheet of a firm. This machine is taken over by a creditor of ₹ 5,40,000 at 5% below the net value. The balance amount of the creditor was paid through bank. By what amount should the bank account be credited for this transaction?

Rama, a partner, took over Machinery of ₹ 50,000 in full settlement of her Loan of ₹ 60,000. Machinery was already transferred to Realisation Account. How it will effect the Realisation Account?

Dada, Yuvi and Viru were partners, sharing profits and losses in the ratio 3 : 2 : 1. Their books showed a Workmen Compensation Reserve of ₹ 1,00,000. Workmen’s claim amounted to ₹ 60,000. How will it affect the books of accounts at the time of the dissolution of the firm?

Assertion (A): Dissolution of partnership refers to a change in the existing agreement among the partners.

Reason (R): In case of dissolution of partnership the firm continues its business and books of accounts need not be closed.

In the context of the above two statements, which of the following is correct?

Assertion (A): On dissolution of a partnership firm, bank overdraft is first transferred to the credit side of realisation account and then paid off.

Reason (R): Bank Overdraft is a third party liability and hence transferred to Realisation Account.

In the context of the above two statements, which of the following is correct?

Assertion (A): Loan from a partner is not transferred to Realisation Account.

Reason (R): Loan from a partner is not an outside liability. It is repaid prior to repayment of Capitals of partners.

In the context of the above two statements, which of the following is correct:

Assertion (A): Assets are revalued and liabilities are reassessed in case of dissolution of partnership.

Reason (R): A Revaluation Account is prepared on dissolution of partnership and gain or loss on revaluation is distributed between the partners.

In the context of the above two statements, which of the following is correct?

Assertion (A): On dissolution, if a partner is appointed to realise the assets and he gets a commission on realisation of assets, he will be liable to bear the realisation expenses also.

Reason (R): In the absence of specific agreement, partner doing the dissolution work and getting commission is not liable to bear the realisation expenses.

In the context of the above two statements, which of the following is correct?

Assertion (A): Dissolution of partnership firm refers to the dissolution of the partnership among all the partners of the firm.

Reason (R): Dissolution of partnership firm results into closure of business and hence dissolution of partnership also.

In the context of the above two statements, which of the following is correct?

Assertion (A): On dissolution, ‘Loan by firm to a Partner’ is not transferred to Partner’s Capital Account but is recovered from him.

Reason (R): Such a loan is an asset of the firm and hence this amount is recovered from the partner so that it is utilised to make payment of third party liabilities of the firm.

In the context of the above two statements, which of the following is correct?

Assertion (A): Partner’s private property can be used in paying off the firm’s debts. 

Reason (R): In case of partnership firm, partner’s liability is unlimited.

In the context of the above two statements, which of the following is correct?

Assertion (A): Loan from the wife of a partner is treated just like loan from the partner himself.

Reason (R): It is not transferred to Realisation Account.

In the context of the above two statements, which of the following is correct?

Assertion (A): On dissolution of a firm, advertisement suspense account appearing on the assets side of the balance sheet will not be transferred to Realisation Account. 

Reason (R): Advertisement Suspense Account is a fictitious asset and hence will be transferred to the debit side of partner’s capital accounts. 

In the context of the above two statements, which of the following is correct?

Assertion (A): On dissolution, there will be no entry if creditors for ₹ 50,000 are given stock worth ₹ 60,000 in full settlement of their debt.

Reason (R): On dissolution, there will be no entry if Partner’s Loan to the firm amounting to ₹ 50,000 is settled by giving him stock worth ₹ 60,000.

In the context of the above two statements, which of the following is correct?

Manav and Daksh were partners sharing profits and losses in the ratio of 5 : 3. Their firm was dissolved on March 31, 2023. On the date of dissolution, Daksh’s Loan to the firm amounted to ₹ 80,000 and was settled at ₹ 75,000.

Assertion (A): Daksh’s Loan will be debited by ₹ 75,000 only.

Reason (R): Daksh’s Loan to be closed only by the amount paid to him.

Assertion: A revaluation account is prepared at the time of dissolution of a partnership.

Reason: A revaluation account is prepared to determine the net gain/loss on realisation of assets and settlement of liabilities.

Which one of the following is correct?