Book Keeping Accountancy Solutions 2014 Solutions for Class 12 Commerce Accountancy Chapter 6 Dissolution Of Partnership Firm are provided here with simple step-by-step explanations. These solutions for Dissolution Of Partnership Firm are extremely popular among class 12 Commerce students for Accountancy Dissolution Of Partnership Firm Solutions come handy for quickly completing your homework and preparing for exams. All questions and answers from the Book Keeping Accountancy Solutions 2014 Book of class 12 Commerce Accountancy Chapter 6 are provided here for you for free. You will also love the ad-free experience on Meritnation’s Book Keeping Accountancy Solutions 2014 Solutions. All Book Keeping Accountancy Solutions 2014 Solutions for class 12 Commerce Accountancy are prepared by experts and are 100% accurate.

Page No 181:

Question 1.A1:

Objective type Questions.
Answer in one Sentence only.

What is dissolution of partnership firm?

Answer:

Dissolution means termination of the existing relationship between the partners of a firm. It means that the business will come to an end and the firm will wind up its business. Accordingly, all the assets will be realised and liabilities will be paid off. It can be dissolved either voluntarily by the partners or compulsorily by the order of the court.

Page No 181:

Question 1.A2:

Objective type Questions.
Answer in one Sentence only.

When is Realisation Account opened?

Answer:

Realisation Account is opened at the time of dissolution of a partnership firm. In this account, the assets and liabilities are transferred at their book values. Also, the firm’s assets are realised and liabilities are paid off.

Page No 181:

Question 1.A3:

Objective type Questions.
Answer in one Sentence only.

Which accounts are not transferred to Realisation Account?

Answer:

The following accounts are not transferred to Realisation Account:

1. Cash/Bank A/c,
2. Bank overdraft,
3. Reserve fund,
4. Credit/Debit balance of Profit & Loss Account,
5. Partners’ Capital Accounts and
6. Partner’s Loan Account.

Page No 181:

Question 1.A4:

Objective type Questions.
Answer in one Sentence only.

Who is called Insolvent person?

Answer:

When a person is unable to contribute fully or partially to discharge his/her liabilities out of his/her private assets, then that person is regarded as an insolvent. Thus, in the following two situations, a partner is declared as insolvent:
a. When his/her personal assets are insufficient
b. When his/her debit capital balance cannot be covered

Page No 181:

Question 1.A5:

Objective type Questions.
Answer in one Sentence only.

What is Capital Deficiency?

Answer:

The debit balance of an insolvent partner’s capital account that cannot be satisfied due to lack of surplus balance is called capital deficiency. This deficiency is to be borne by all the solvent partners in their profit sharing ratio.

Page No 181:

Question 1.A6:

Objective type Questions.
Answer in one Sentence only.

In what proportion is the balance on Realisation Account transferred to Partner’s Capital Account?

Answer:

The balance of the Realisation Account is to be transferred to Partners’ Capital Accounts in their profit-sharing ratio. If the partnership deed is silent, then profits or losses arising from Realisation Account are to be distributed in equal proportion amongst all the partners of the firm.

Page No 181:

Question 1.A7:

Objective type Questions.
Answer in one Sentence only.

Who should bear the capital deficiency of an insolvent partner?

Answer:

The capital deficiency of an insolvent partner is borne by all other solvent partners in their profit-sharing ratio.

Page No 181:

Question 1.A8:

Objective type Questions.
Answer in one Sentence only.

Which account is debited on repayment of Partner’s Loan?

Answer:

Partner’s loan appearing in the Balance Sheet is not transferred to Realisation Account. In fact, a separate account named as Partner’s Loan Account is maintained. At the time of repayment of partner’s loan, Partner’s Loan A/c is debited and Cash A/c is credited.

Page No 181:

Question 1.A9:

Objective type Questions.
Answer in one Sentence only.

Why is Realisation Account opened?

Answer:

Realisation Account is opened to determine the amount of profit or loss from the realisation of assets and payment of liabilities at the time of dissolution of a partnership firm.

Page No 181:

Question 1.A10:

Objective type Questions.
Answer in one Sentence only.

Which account is debited on payment of dissolution expenses?

Answer:

On payment of dissolution expenses, Realisation Account is to be debited. These are a firm’s expenses and should be paid by the firm. However, when such expenses are paid by the firm on behalf of a partner, then the Concerned Partner’s Capital Account is debited.

Page No 181:

Question 1.B1:

Write the word / term / phrase, which can substitute each of the following statements.

Debit balance in realisation account.

Answer:

Realisation Loss

Explanation: Debit balance in Realisation Account is regarded as ‘Loss on Realisation’. It arises when the debit side of Realisation A/c is more than its credit side. This loss is borne by all the partners’ in their profit-sharing ratio.

Page No 181:

Question 1.B2:

Write the word / term / phrase, which can substitute each of the following statements.

Winding up of partnership business.

Answer:

Dissolution of Partnership

Explanation: Winding-up of partnership business is known as dissolution of partnership, which means there is a change in the business relationship among the partners but the firm may continue its business.

Page No 181:

Question 1.B3:

Write the word / term / phrase, which can substitute each of the following statements.

An account opened to find out the Profit or Loss on Sale of Assets and Settlement of Liabilities.

Answer:

Realisation Account

Explanation: Realisation Account is opened to find out the profit or loss on sale of assets and settlement of liabilities at the time of dissolution of the firm.

Page No 181:

Question 1.B4:

Write the word / term / phrase, which can substitute each of the following statements.

Debit balance of an insolvent Partner’s Capital Account.

Answer:

Capital Deficiency

Explanation: The debit balance of an insolvent partner’s capital account is known as capital deficiency. This deficiency is to be borne by all the solvent partners in their profit-sharing ratio.

Page No 181:

Question 1.B5:

Write the word / term / phrase, which can substitute each of the following statements.

Credit balance in Realisation Account.

Answer:

Realisation Profit

Explanation: Credit balance in Realisation Account is regarded as ‘Profit on Realisation’. It arises when the credit side of Realisation A/c is more than the debit side. This profit is distributed among all the partners in their profit-sharing ratio.

Page No 181:

Question 1.B6:

Write the word / term / phrase, which can substitute each of the following statements.

Conversion of assets into cash on dissolution of firm.

Answer:

Realisation

Explanation: The procedure of converting assets into cash at the time of dissolution of a firm is termed as realisation. In this procedure, Realisation Account is opened in order to determine the correct amount of profits or losses.

Page No 181:

Question 1.B7:

Write the word / term / phrase, which can substitute each of the following statements.

Liability likely to arise in future on happening of certain events.

Answer:

Contingent Liabilities

Explanation: Liability likely to arise in future on happening of certain events is known as contingent liabilities. These are termed as contingent, as their occurrence is dependent upon the happening of a future event, which may or may not happen (i.e. it is uncertain). Therefore, these are not shown in a company’s Balance Sheet.

Page No 181:

Question 1.B8:

Write the word / term / phrase, which can substitute each of the following statements.

Assets which are not recorded in the books of accounts.

Answer:

Unrecorded Assets

Explanation: Those assets that go unrecorded or are skipped in the books of accounts are termed as unrecorded assets. Thus, as these are unrecorded in the books, they are not transferred to the Realisation Account. However, if any unrecorded asset is taken over by any partner, then it is recorded by crediting the Realisation Account and debiting the Concerned Partner’s Capital Account.

Page No 181:

Question 1.B9:

Write the word / term / phrase, which can substitute each of the following statements.

The account which shows realisation of assets and discharge of liabilities.

Answer:

Realisation Account

Explanation: The account that shows realisation of assets and discharge of liabilities is Realisation Account. It is opened to ascertain the profit or the loss on sale of assets and settlement of liabilities.

Page No 181:

Question 1.B10:

Write the word / term / phrase, which can substitute each of the following statements.

Expenses incurred on dissolution of a firm.

Answer:

Dissolution/Realisation Expenses

Explanation: Dissolution/Realisation Expenses are the expenses incurred on dissolution of a firm. These expenses belong to the firm and hence, they should be paid by the firm. However, sometimes these expenses are paid by the firm on behalf of a partner. In such cases, the Concerned Partner’s Capital Account is debited.

Page No 181:

Question 1.C1:

State whether the following statements are True or False.

The firm is dissolved automatically on the retirement of a partner.

Answer:

False

Explanation: Change in profit sharing ratio among the existing partners, admission of a new partner, retirement or death of a partner, result in dissolution of partnership. In such instances, the existing partnership deed gets dissolved and it is replaced by a new partnership deed. However, the partnership firm continues to operate. On the other hand, in case of dissolution of a partnership firm, the whole firm is put to an end (along with the partnership deed).

Therefore, it is incorrect to say that a firm dissolves on the retirement of a partner.

Page No 181:

Question 1.C2:

State whether the following statements are True or False.

On dissolution Cash or Bank Account is closed automatically.

Answer:

True

Explanation:
On dissolution, the Cash or Bank Account is closed automatically because if the capital accounts show any balance, then such balance is transferred to the Cash or Bank Account. This is done so that both the sides of the Cash or the Bank Account show the same balance. This is because of the double-entry system of book-keeping.

Page No 181:

Question 1.C3:

State whether the following statements are True or False.

On dissolution Bank Overdraft is transferred to Realisation Account.

Answer:

False

Explanation:
The amount of bank overdraft is not transferred to Realisation Account; instead, it is shown on the credit side of Bank Account.

Page No 181:

Question 1.C4:

State whether the following statements are True or False.

A Solvent partner having debit balance to his Capital Account does not share the deficiency of Insolvent Partner’s Capital Account.

Answer:

True

Explanation:
A solvent partner who has a debit balance does not share deficiency of an insolvent partner, even though he or she may be more financially sound compared to the other solvent partners. This is because it violates the principle of natural justice and equity.

Page No 181:

Question 1.C5:

State whether the following statements are True or False.

At the time of dissolution of Partnership Firm all assets should be transferred to Realisation A/c.

Answer:

False

Explanation: All assets except the cash or bank balances are transferred to the Realisation Account. Therefore, the given statement is incorrect.

Page No 181:

Question 1.C6:

State whether the following statements are True or False.

Debit balance of insolvent Partner’s Capital A/c is known as Capital Deficiency.

Answer:

True

Explanation: Debit balance of an insolvent partner’s capital account is known as capital deficiency. This deficiency is to be borne by all the solvent partners in their profit sharing ratio.

Page No 181:

Question 1.C7:

State whether the following statements are True or False.

At the time of dissolution loan from partner will be transferred to Realisation Account.

Answer:

False

Explanation: Partner’s loan is transferred to a separate account known as Partner’s Loan Account. This is because partner’s loan is not an external (outside) liability. Its payment can be made only after the settlement of external liabilities.

Page No 181:

Question 1.C8:

State whether the following statements are True or False.

Dissolution takes place when the relation among the partner’s comes to an end.

Answer:

True

Explanation: Dissolution takes place when the business relation among the existing partners comes to an end. This can be done either voluntarily or compulsorily, as per the order of the court of justice.

Page No 181:

Question 1.C9:

State whether the following statements are True or False.

The insolvency loss at the time of dissolution of the firm is shared by the Solvent Partner’s in their Profit-sharing ratio.

Answer:

True

Explanation: Insolvency loss, i.e. capital deficiency (debit balance in the capital account of an insolvent partner) is shared among the solvent partners in their profit sharing ratio.

Page No 181:

Question 1.C10:

State whether the following statements are True or False.

Realisation loss is not transferred to insolvent partner’s Capital Account.

Answer:

False

Explanation:
Realisation loss is transferred to All Partners’ Capital Accounts (including the insolvent partner). After this, the total amount of capital deficiency is ascertained and is shared by the other solvent partners in their profit-sharing ratio.



Page No 182:

Question 1.D1:

Select the most appropriate alternative from those given below :

In case of dissolution assets and liabilities are transferred to _____________A/c.
a) Bank A/c
b) Partner’s capital A/c
c) Realisation A/c
d) Partner’s current A/c

Answer:

In case of dissolution, assets and liabilities are transferred to Realisation A/c.

Explanation: All the assets (except cash or bank balances) are transferred to the debit side, whereas all the liabilities (except bank overdraft) are transferred to the credit side of Realisation Account. Thereafter, at the time of realisation, the assets so realised are shown on the credit side and the settlement of liabilities is shown on the debit side.

Page No 182:

Question 1.D2:

Select the most appropriate alternative from those given below :

Dissolution expenses are credited to _____________A/c.
a) Realisation A/c
b) Cash/Bank A/c
c) Partner’s Capital A/c
d) Partner’s Loan A/c

Answer:

Dissolution expenses are credited to Cash/Bank A/c.

Explanation: Payment of realisation expenses results in outflow of cash. Therefore, they are credited to Cash/Bank A/c (as these lead to decrease in cash balance).

Page No 182:

Question 1.D3:

Select the most appropriate alternative from those given below :

Deficiency of Insolvent partner will be suffered by solvent partners in their ___________ ratio.
a) capital ratio
b) profit-sharing ratio
c) sale ratio
d) liquidity ratio

Answer:

Deficiency of Insolvent partner will be suffered by solvent partners in their profit-sharing ratio.

Explanation: If deficiency of insolvent partner (i.e. the debit balance in the insolvent partner’s capital account) is treated as an ordinary loss, then this loss is to be borne by the other solvent partners in their profit-sharing ratio.

Page No 182:

Question 1.D4:

Select the most appropriate alternative from those given below :

If any asset is taken over by partner from firm his Capital A/c will be____________.
a) credited
b) debited
c) added
d) none of these

Answer:

If any asset is taken over by a partner from the firm, then his Capital A/c will be debited.

Explanation: When an asset is taken over by a partner, then the Realisation A/c is credited and the Concerned Partner’s Capital A/c is debited with the agreed price at which the asset is taken over by him.

Page No 182:

Question 1.D5:

Select the most appropriate alternative from those given below :

If any unrecorded liability is paid on dissolution of the firm____________ account is debited.
a) Cash/Bank A/c
b) Realisation A/c
c) Partner’s Capital A/c
d) Loan A/c

Answer:

If any unrecorded liability is paid on dissolution of the firm, then Realisation account is debited.

Explanation: All the liabilities are paid-off by debiting the Realisation A/c. This is because all the payments are made through the Realisation Account, so that the true profits or losses can be ascertained.

Page No 182:

Question 1.D6:

Select the most appropriate alternative from those given below :

Partnership is compulsorily dissolved when the partners of the firm become ____________
a) Solvent
b) Insolvent
c) Creditor
d) None of these

Answer:

Partnership is compulsorily dissolved when the partners of the firm become insolvent.

Explanation: When the partners of a firm become insolvent, it implies that the assets of the firm have decreased in comparison to the liabilities. Moreover, the partners do not have enough funds to make payment to the creditors; hence, the partnership is compulsorily dissolved as per the order of a court of justice.

Page No 182:

Question 1.D7:

Select the most appropriate alternative from those given below :

Assets and liabilities are transferred to Realisation Account at their ____________values.
a) market
b) purchase
c) sale
d) book

Answer:

Assets and liabilities are transferred to the Realisation Account at their book values.

Explanation: In order to determine the correct amount of profit or loss on the eve of dissolution of a partnership firm, all assets and liabilities are transferred to the Realisation Account at their book values.

Page No 182:

Question 1.D8:

Select the most appropriate alternative from those given below :

If the number of partners in a firm falls below two, the firm stands____________
a) dissolved
b) established
c) realisation
d) None of these

Answer:

If the number of partners in a firm falls below two, the firm stands dissolved.

Explanation: As per the Indian Partnership Act of 1932, at least two people are required to form a partnership firm. Thus, if the minimum number of members falls below two, then the partnership firm gets automatically dissolved.

Page No 182:

Question 1.D9:

Select the most appropriate alternative from those given below :

Realisation Account is __________on realisation of assets.
a) debited
b) credited
c) deducted
d) None of these

Answer:

Realisation Account is credited on realisation of assets.

Explanation: If the assets are realised in cash, then the Realisation A/c is credited and Cash/Bank A/c is debited with the amount actually realised.

Page No 182:

Question 1.D10:

Select the most appropriate alternative from those given below :

All activities of the partnership firm cease (stop) on ____________ of firm.
a) dissolution
b) admission
c) retirement
d) None of these

Answer:

All activities of the partnership firm cease (stop) on dissolution of firm.

Explanation: Dissolution of a partnership firm involves discontinuance of the firm’s business, besides the termination of the existing partnership deed. Thus, at the time of dissolution of a partnership firm, all the activities of the firm tend to cease.

Page No 182:

Question 1:

PRACTICAL PROBLEMS

Sushil and Sumit were in partnership sharing profits and losses in the proportion of 3/5 and 2/5 respectively. On 31st March, 2005 they decide to dissolve the firm when their Balance Sheet was as under:

Balance Sheet as on 31st March, 2005
 
Liabilities
Amount
Rs
Assets
Amount
Rs
Sushil’s Capital
20,000
Plant and Machinery
15,000
Sumit’s Capital
18,000
Stock
15,000
General Reserve
5,000
Sundry Debtors
22,000
Sumit’s Loan A/c
2,000
Bank
3,000
Sundry Creditors
10,000
 
 
 
55,000
 
55,000
 
 
 
 

The Assets realised as follows: Stock Rs 14,000, Plant and Machinery Rs 12,000 and Debtors Rs 20,000. The Sundry Creditors were paid Rs 9,000 in full settlement.

Prepare: Realisation Account, Partners Capital Accounts and Bank Account.

Answer:

Realisation Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Sundry Assets:
 
Sundry Liabilities- Sundry Creditors
10,000
Plant and Machinery
15,000
 
 
 
Stock
15,000
 
Bank A/c:
 
Sundry Debtors
22,000
52,000
Stock
14,000
 
 
 
Plant and Machinery
12,000
 
Bank A/c (Sundry Creditors)
9,000
Bank
20,000
46,000
 
 
 
 
 
 
Loss transferred to:
 
 
 
Sunil’s Capital A/c
3,000
 
 
 
Sumit’s Capital A/c
2,000
5,000
 
61,000
 
61,000
 
 
 
 

 

Partners’ Capital Accounts
Dr.
Cr.
Particulars
Sushil
Sumit
Particulars
Sushil
Sumit
 
 
 
 
 
 
Realisation A/c (Loss)
3,000
2,000
Balance b/d
20,000
18,000
Bank A/c
20,000
18,000
General Reserve
3,000
2,000
 
23,000
20,000
 
23,000
20,000
 
 
 
 
 
 

 

Sumit’s Loan Account
Dr.
Cr.
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
 
 
 
 
Bank A/c
2,000
Balance b/d
2,000
 
2,000
 
2,000
 
 
 
 

 

Cash/Bank Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Balance b/d
3,000
Realisation A/c (Liabilities)
9,000
Realisation A/c (Assets)
46,000
Loan A/c
2,000
 
 
Capital A/cs:
 
 
 
Sushil
20,000
 
 
 
Sumit
18,000
38,000
 
49,000
 
49,000
 
 
 
 



Page No 183:

Question 2:

PRACTICAL PROBLEMS

Ganesh and Chandan were partners sharing profits and losses in the proportion of 3:2. They dissolve the partnership firm on 31st March, 2011 when their position was as follows:

Balance Sheet as on 31st March, 2011
 
Liabilities
Amount
Rs
Assets
Amount
Rs
Sundry Creditors
25,000
Debtors
1,12,500
 
Bank overdraft
20,000
Less: R.D.D.
12,500
1,00,000
Reserve Fund
30,000
Stock
2,25,000
Capital Accounts:
 
Furniture
50,000
Ganesh
2,30,000
Motor Car
75,000
Chandan
1,50,000
Cash in hand
5,000
 
4,55,000
 
4,55,000
 
 
 
 

The Assets realised as follows: Debtors Rs 90,000, Stock Rs 2,00,000, and Goodwill Rs 25,000, Motor Car was taken over by Ganesh for Rs 70,000 and Furniture by Chandan for Rs 60,000.
The Creditors were paid Rs 22,500 in full settlement. The expenses of realisation amounted to Rs 10,000.

Pass necessary journal entries in the books of the firm.

Answer:

 
Journal Entry
 
Date
Particulars
L.F.
Debit Amount
Rs
Credit Amount
Rs
 
 
 
 
 
 
 
Realisation A/c
Dr.
 
4,62,500
 
 
   To Debtors A/c
 
 
 
1,12,500
 
   To Stock A/c
 
 
 
2,25,000
 
   To Furniture A/c
 
 
 
50,000
 
To Motor Car A/c
 
 
 
75,000
 
(Assets transferred to Realisation A/c)
 
 
 
 
 
  
 
 
 
 
 
Sundry Creditors A/c
Dr.
 
25,000
 
 
Reserve for Doubtful Debts A/c
Dr.
 
12,500
 
 
   To Realisation A/c
 
 
 
37,500
 
(Liabilities transferred to Realisation A/c)
 
 
 
 
 
 
 
 
 
 
 
Cash A/c
Dr.
 
3,15,000
 
 
   To Realisation A/c
 
 
 
3,15,000
 
(Assets realised)
 
 
 
 
 
 
 
 
 
 
 
Ganesh’s Capital A/c
Dr.
 
70,000
 
 
   To Realisation A/c
 
 
 
70,000
 
(Motor Van taken over by Ganesh)
 
 
 
 
 
 
 
 
 
 
 
Chandan’s Capital A/c
Dr.
 
60,000
 
 
   To Realisation A/c
 
 
 
60,000
 
(Furniture taken over by Chandan)
 
 
 
 
 
 
 
 
 
 
 
Realisation A/c
Dr.
 
32,500
 
 
  To Cash A/c
 
 
 
32,500
 
(Realisation expenses and creditors are paid off)
 
 
 
 
 
 
 
 
 
 
 
Ganesh’s Capital A/c
Dr.
 
7,500
 
 
Chandan’s Capital A/c
Dr.
 
5,000
 
 
   To Realisation A/c
 
 
 
12,500
 
(Loss transferred to Partner’s Capital A/c)
 
 
 
 
 
 
 
 
 
 
 
Reserve Fund A/c
 
 
30,000
 
 
   To Ganesh’s Capital A/c
 
 
 
18,000
 
   To Chandan’s Capital A/c
 
 
 
12,000
 
(Reserve Fund transferred to Partner’s Capital A/c)
 
 
 
 
 
 
 
 
 
 
 
Bank Overdraft A/c
Dr.
 
20,000
 
 
   To Cash A/c
 
 
 
20,000
 
(Bank overdraft transferred to Cash A/c)
 
 
 
 
 
 
 
 
 
 
 
Ganesh’s Capital A/c
Dr.
 
1,70,500
 
 
Chandan’s Capital A/c
Dr.
 
97,000
 
 
   To Cash A/c
 
 
 
2,67,500
 
(Amount paid off on account of final settlement)
 
 
 
 
 
 
 
 
 
 

 Note: As per the book the amounts paid to Ganesh and Chandan are Rs 1,72,500 and Rs 95,000, respectively, however, as per the solution above these balances should be Rs 1,70,500 and Rs 97,000, respectively.

Page No 183:

Question 3:

PRACTICAL PROBLEMS

Anil and Sunil were partners sharing profits and losses in the ratio of 3:2. Their Balance Sheet as on 31st March, 2009.

Balance Sheet as on 31st March, 2009
 
Liabilities
Amount
Rs
Assets
Amount
Rs
Capital Account
 
Bank
30,000
Anil
50,000
Stock
25,000
Sunil
30,000
Debtors
70,000
Current Account
 
Plant
45,000
Anil
15,000
Building
35,000
Sunil
10,000
 
 
Creditors
87,000
 
 
Bills payable
13,000
 
 
 
2,05,000
 
2,05,000
 
 
 
 

The firm was dissolved on the above date and the assets realised as under:

1) Stock Rs 20,000, Debtors Rs 60,000, Plant Rs 40,000 and Building Rs 30,000.

2) Anil agreed to pay off the bills payable.

3) Creditors were paid in full.

4) Dissolution expenses were Rs 7,000.
 
Prepare:

(i) Realisation Account

(ii) Bank Account

(iii) Current Account and Capital Account of the partners.

Answer:

Realisation Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Sundry Assets:
 
Sundry Liabilities:
 
Stock
25,000
 
Sundry Creditors
87,000
 
Debtors
70,000
 
Bills Payable
13,000
1,00,000
Plant
45,000
 
 
 
Building
35,000
1,75,000
Bank A/c:
 
 
 
Stock
20,000
 
Bank A/c-
 
Debtors
60,000
 
Creditors
87,000
 
Plant
40,000
 
Dissolution Expenses
7,000
94,000
Building
30,000
1,50,000
Anil’s Current A/c
13,000
Loss transferred to:
 
 
 
Anil’s Current A/c
19,200
 
 
 
Sunil’s Current A/c
12,800
32,000
 
2,82,000
 
2,82,000
 
 
 
 

 

Partners’ Current Accounts
Dr.
Cr.
Particulars
Anil
Sunil
Particulars
Anil
Sunil
 
 
 
 
 
 
Realisation A/c (Loss)
19,200
12,800
Balance b/d
15,000
10,000
Capital A/c
8,800
 
Realisation A/c (Bills Payable paid off)
13,000
 
 
 
 
Capital A/c
 
2,800
 
28,000
12,800
 
28,000
12,800
 
 
 
 
 
 

 

Partners’ Capital Accounts
Dr.
Cr.
Particulars
Anil
Sunil
Particulars
Anil
Sunil
 
 
 
 
 
 
Current A/c
 
2,800
Balance b/d
50,000
30,000
Bank A/c
58,800
27,200
Current A/c
8,800
 
 
58,800
30,000
 
58,800
30,000
 
 
 
 
 
 

 

Bank Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
Balance  b/d
30,000
Realisation A/c (Liabilities)
94,000
Realisation A/c (Assets)
1,50,000
Capital A/cs:
 
 
 
Anil
58,800
 
 
 
Sunil
27,200
86,000
 
1,80,000
 
1,80,000
 
 
 
 



Page No 184:

Question 4:

PRACTICAL PROBLEMS

X, Y and Z were carrying on business. They share profits and losses in the ratio of 5:3:2 respectively. Their Balance Sheet as on 31st March, 2010 was as under:

Balance Sheet as on 31st March, 2010
 
Liabilities
Amount
Rs
Assets
Amount
Rs
Sundry Creditors
21,000
Plant and Machinery
20,000
Y’s loan
5,000
Investment
8,000
Reserve fund
20,000
Stock
30,000
Capital Account:
 
Debtors
18,000
 
X
20,000
Less: R.D.D.
1,000
17,000
Y
10,000
Cash in hand
2,000
Z
4,000
Cash at Bank
3,000
 
80,000
 
80,000
 
 
 
 

On the above date the firm was dissolved and the assets realised as under:

1) Investment Rs 5,000, Stock Rs 24,000 and Debtors Rs 15,000.

2) The Plant and Machinery was taken over by Mr. ‘X’ at book value.

3) Sundry Creditors and Mr. ‘Y’ loan were paid in full.

4) Realisation expenses incurred Rs 1,000.

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

Answer:

Realisation Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Sundry Assets:
 
Sundry Liabilities:
 
Plant and Machinery
20,000
 
Reserve for Doubtful Debts
1,000
 
Investments
8,000
 
Sundry Creditors
21,000
22,000
Stock
30,000
 
 
 
Debtors
18,000
76,000
Bank A/c:
 
 
 
Investments
5,000
 
Bank A/c
 
Stock
24,000
 
Creditors
21,000
 
Debtors
15,000
44,000
Realisation Expenses
1,000
22,000
X’s Capital A/c (Plant and Machinery)
20,000
 
 
Loss transferred to:
 
 
 
 
X’s Capital A/c
6,000
 
 
 
Y’s Capital A/c
3,600
 
 
 
Z’s Capital A/c
2,400
12,000
 
98,000
 
98,000
 
 
 
 
 
Partners’ Capital Accounts
Dr.
Cr.
Particulars
X
Y
Z
Particulars
X
Y
Z
 
 
 
 
 
 
 
 
Realisation A/c (Loss)
6,000
3,600
2,400
Balance b/d
20,000
10,000
4,000
Realisation A/c (Plant and Machinery)
20,000
 
 
Reserve Fund
10,000
6,000
4,000
Bank A/c
4,000
12,400
5,600
 
 
 
 
 
30,000
16,000
8,000
 
30,000
16,000
8,000
 
 
 
 
 
 
 
 
 
Bank Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Balance b/d
3,000
Realisation A/c (Liabilities)
22,000
Cash A/c
2,000
Capital A/cs:
 
Realisation A/c (Assets)
44,000
X
4,000
 
 
 
Y
12,400
 
 
 
Z
5,600
22,000
 
 
Y’s Loan A/c
5,000
 
49,000
 
49,000
 
 
 
 
 
Y’s Loan Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Bank A/c
5,000
Balance b/d
5,000
 
5,000
 
5,000
 
 
 
 

Page No 184:

Question 5:

PRACTICAL PROBLEMS

A, B and C were partners sharing profits and losses in the ratio of 3:2:1. On 31st March, 2010. Their Balance Sheet was as follows:

Balance Sheet as on 31st March, 2010
 
Liabilities
Amount
Rs
Assets
Amount
Rs
Sundry Creditors
15,400
Cash at Bank
3,500
Bills payable
3,600
Stock
19,800
A’s loan A/c
10,000
Debtors
15,000
 
Capital Account:
 
Less: Provision
1,000
14,000
A
20,000
Join Life Policy
4,000
B
16,000
Plant and Machinery
43,700
C
8,000
 
 
Reserve Fund
12,000
 
 
 
85,000
 
85,000
 
 
 
 

The firm was dissolved on 31st March, 2010 and the assets realised as follows:

1) Join Life Policy was taken over by Mr. A at Rs 5,000.

2) Stock realised Rs 18,000, Debtors realised Rs 14,500, Plant and Machinery was sold for Rs 36,000.

3) Liabilities were paid in full. In addition one bill for Rs 700 under discount was dishonoured and had to be taken up by the firm.

4) There were no realisation expenses.

Give the Journal entries and necessary Ledger Accounts to close the books of the firm.

Answer:

 
Journal Entry

 

Date
Particulars
L.F.
Debit Amount
Rs
Credit Amount
Rs
 
 
 
 
 
 
 
Realisation A/c
Dr.
 
82,500
 
 
   To Stock A/c
 
 
 
19,000
 
   To Debtors A/c
 
 
 
15,000
 
   To Joint Life Policy A/c
 
 
 
4,000
 
 To Plant and Machinery A/c
 
 
 
43,700
 
(Sundry Assets transferred to Realisation A/c)
 
 
 
 
 
  
 
 
 
 
 
Sundry Creditors A/c
Dr.
 
15,400
 
 
Bills Payable A/c
 
 
3,600
 
 
Provision on Debtors A/c
 
 
1,000
 
 
   To Realisation A/c
 
 
 
20,000
 
(Sundry Liabilities transferred to Realisation A/c)
 
 
 
 
 
 
 
 
 
 
 
Bank A/c
Dr.
 
68,500
 
 
   To Realisation A/c
 
 
 
68,500
 
(Assets realised)
 
 
 
 
 
 
 
 
 
 
 
Realisation A/c
Dr.
 
19,700
 
 
   To Bank A/c
 
 
 
19,700
 
(Liabilities paid off)
 
 
 
 
 
 
 
 
 
 
 
A’s Capital A/c
Dr.
 
5,000
 
 
  To Realisation A/c
 
 
 
5,000
 
(Joint Life Policy taken over by Mr. A for Rs 5,000)
 
 
 
 
 
 
 
 
 
 
 
A’s Capital A/c
 
 
4,350
 
 
B’s Capital A/c
 
 
2,900
 
 
C’s Capital A/c
 
 
1,450
 
 
   To Realisation A/c
 
 
 
8,700
 
(Loss on realization transferred to Partner’s Capital A/c)
 
 
 
 
 
 
 
 
 
 
 
Reserve Fund
Dr.
 
12,000
 
 
   To A’s Capital A/c
 
 
 
6,000
 
   To B’s Capital A/c
 
 
 
4,000
 
   To C’s Capital A/c
 
 
 
2,000
 
(Reserve Fund transferred to Partner’s Capital A/c)
 
 
 
 
 
 
 
 
 
 
 
A’s Loan A/c
Dr.
 
10,000
 
 
   To Bank A/c
 
 
 
10,000
 
(A’s Loan has been paid off)
 
 
 
 
 
 
 
 
 
 
 
A’s Capital A/c
Dr.
 
16,650
 
 
B’s Capital A/c
Dr.
 
17,100
 
 
C’s Capital A/c
Dr.
 
8,550
 
 
  To Bank A/c
 
 
 
42,300
 
(Amount paid off to Partner on account of final settlement)
 
 
 
 
 
 
 
 
 
 

 

Realisation Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Sundry Assets:
 
Sundry Liabilities:
 
Stock
19,800
 
Provision on Debtors
1,000
 
Debtors
15,000
 
Bills Payable
3,600
 
Joint Life Policy
4,000
 
Sundry Creditors
15,400
20,000
Plant and Machinery
43,700
82,500
 
 
 
 
Mr. A’s Capital A/c (Joint Life Policy)
5,000
Bank A/c:
 
Bank A/c:
 
Creditors
15,400
 
Stock
18,000
 
Bills Payable
3,600
 
Debtors
14,500
 
Bill Dishonoured
700
19,700
Plant and Machinery
36,000
68,500
 
 
 
 
 
 
Loss transferred to:
 
 
 
A’s Capital A/c
4,350
 
 
 
B’s Capital A/c
2,900
 
 
 
C’s Capital A/c
1,450
8,700
 
93,500
 
93,500
 
 
 
 

 

Partners’ Capital Accounts
Dr.
Cr.
Particulars
A
B
C
Particulars
A
B
C
 
 
 
 
 
 
 
 
Realisation A/c (Loss)
4,350
2,900
1,450
Balance b/d
20,000
16,000
8,000
Realisation A/c (Joint Life Policy)
5,000
 
 
Reserve fund
6,000
4,000
2,000
Balance c/d
16,650
17,100
8,550
 
 
 
 
 
26,000
20,000
10,000
 
26,000
20,000
10,000
 
 
 
 
 
 
 
 

 

Bank Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Balance b/d
3,500
Realisation A/c (Liabilities)
19,700
Realisation A/c (Assets)
68,500
Capital A/cs:
 
 
 
A
16,650
 
 
 
B
17,100
 
 
 
C
8,550
42,300
 
 
A’s Loan A/c
10,000
 
72,000
 
72,000
 
 
 
 

 

A’s Loan Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Bank A/c
10,000
Balance b/d
10,000
 
10,000
 
10,000
 
 
 
 

Note: As per the book amounts paid to A, B and C is Rs 16,650, Rs 16,700 and Rs 8,950 respectively but as per our solution it should be Rs 16,650, Rs 17,100 and Rs 8,550 respectively.



Page No 185:

Question 6:

PRACTICAL PROBLEMS

Pannalal, Babulal and Hiralal were partners sharing profits and losses in the proportion of 2:2:1, following is their Balance Sheet as on 31st March, 2008.

Balance Sheet as on 31st March, 2008
Liabilities
Amount
Rs
Assets
Amount
Rs
Capital Accounts:
 
Machinery
25,000
Pannalal
30,000
Stock
10,000
Babulal
10,000
Debtors
27,500
 
Hiralal
10,000
Loss: R.D.D.
1,500
26,000
General Reserve
3,000
Investment
12,000
Creditors
20,000
Profit and Loss A/c
9,000
Pannalal’s Loan A/c
4,000
Bank
2,000
Bills payable
7,000
 
 
 
84,000
 
84,000
 
 
 
 

On the above date the partners decided to dissolve the firm:

1) Assets were realised: Machinery Rs 22,500, Stock Rs 9,000, Investment Rs 10,500, Debtors Rs 22,500.

2) Dissolution expenses were Rs 1,500.

3) Goodwill of the firm realised Rs 12,000

Pass the necessary Journal entries in the books of the firm.

Answer:

 

Journal Entry

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

 

 

 

 

 

 

Realisation A/c

Dr.

 

74,500

 

 

   To Machinery A/c

 

 

 

25,000

 

   To Stock A/c

 

 

 

10,000

 

   To Debtors A/c

 

 

 

27,500

 

To Investments A/c

 

 

 

12,000

 

(Sundry Assets transferred to Realisation A/c)

 

 

 

 

 

  

 

 

 

 

 

Creditors A/c

Dr.

 

20,000

 

 

Bills Payable A/c

Dr.

 

7,000

 

 

Reserve for Doubtful Debts A/c

Dr.

 

1,500

 

 

   To Realisation A/c

 

 

 

28,500

 

(Sundry Liabilities transferred to Realisation A/c)

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

76,500

 

 

   To Realisation A/c

 

 

 

76,500

 

(Sundry Assets realised)

 

 

 

 

 

 

 

 

 

 

 

Realisation A/c

Dr.

 

28,500

 

 

   To Bank A/c

 

 

 

28,500

 

(Sundry Liabilities paid off)

 

 

 

 

 

 

 

 

 

 

 

Realisation A/c

Dr.

 

2,000

 

 

   To Pannalal’s Capital A/c

 

 

 

800

 

   To Babulal’s Capital A/c

 

 

 

800

 

   To Hiralal’s Capital A/c

 

 

 

400

 

(Profit on Realisation transferred to Partner’s Capital Account)

 

 

 

 

 

 

 

 

 

 

 

Pannalal’s Capital A/c

Dr.

 

3,600

 

 

Babulal’s Capital A/c

Dr.

 

3,600

 

 

Hiralal’s Capital A/c

Dr.

 

1,800

 

 

   To Profit and Loss A/c

 

 

 

9,000

 

(Profit and Loss A/c (Dr.) transferred to Partner’s Capital A/c)

 

 

 

 

 

 

 

 

 

 

 

General Reserve A/c

Dr.

 

3,000

 

 

  To Pannalal’s Capital A/c

 

 

 

1,200

 

  To Babulal’s Capital A/c

 

 

 

1,200

 

  To Hiralal’s Capital A/c

 

 

 

600

 

(General Reserve transferred to Partner’s Capital A/c)

 

 

 

 

 

 

 

 

 

 

 

Pannalal’s Loan A/c

Dr.

 

4,000

 

 

   To Bank A/c

 

 

 

4,000

 

(Pannalal’s Loan has been paid)

 

 

 

 

 

 

 

 

 

 

 

Pannalal’s Capital A/c

Dr.

 

28,400

 

 

Babulal’s Capital A/c

Dr.

 

8,400

 

 

Hiralal’s Capital A/c

Dr.

 

9,200

 

 

   To Bank A/c

 

 

 

46,000

 

(Amount paid to partners on account of final settlement)

 

 

 

 

 

Page No 185:

Question 7:

PRACTICAL PROBLEMS

Mahesh, Suresh and Jayesh were partners of the firm. They decided to dissolve the firm on 31st March, 2012. Their Balance Sheet as on that date was as under:

Balance Sheet as on 31st March, 2012
Liabilities
Amount
Rs
Assets
Amount
Rs
Creditors
18,000
Cash at Bank
9,600
Loan
4,500
Sundry Assets
51,000
Capitals
 
Debtors
72,600
 
Mahesh
82,500
Less: R.D.D.
3,600
69,000
Suresh
30,000
Stock
23,400
Jayesh
21,000
Furniture
3,000
 
1,56,000
 
1,56,000
 
 
 
 

The firm was dissolved as follows:

1) Mahesh will accept furniture for Rs 2,000 and agreed accept the debtors of book value of Rs 60,000 at on agreed value of Rs 51,000.

2) Suresh will accept stock at an agreed value Rs 20,000, and Sundry Assets of Book value Rs 24,000 at Rs 23,500.

3) Jayesh will accept remaining Sundry Assets for Rs 25,000 He will further accept the liability of loan along with due interest at 12% p.a.

    Interest for three months on this loan was outstanding and was not recorded in the books.

4) Expenses of dissolution were Rs 1,000 and outstanding expenses of Rs 1,200 were to be paid from the firm.

5) The remaining debtors were realised Rs 7,000.

 
Prepare:

1) Realisation A/c

2) Partner’s Capital A/c

3) Bank A/c

Answer:

Realisation Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Sundry Assets:
 
Sundry Liabilities:
 
Assets
51,000
 
Creditors
18,000
 
Debtors
72,600
 
Loan
4,500
 
Stock
23,400
 
Reserve for Doubtful debts
3,600
26,100
Furniture
3,000
1,50,000
Mahesh’s Capital A/c:
 
Bank A/c:
 
 
Furniture
2,000
 
Creditors
18,000
 
Debtors
51,000
53,000
Dissolution Expenses
1,000
 
Suresh’s Capital A/c:
 
Outstanding Expenses
1,200
20,200
Stock
20,000
 
 
 
Sundry Assets
23,500
43,500
Jayesh’s Capital A/c (Loan with its 3 months outstanding Interest)
4,635
Jayesh’s Capital A/c (Sundry Assets)
25,000
 
 
Bank A/c (Debtors)
7,000
 
 
 
 
 
 
Loss transferred to:
 
 
 
Mahesh’s Capital A/c
6,745
 
 
 
Suresh’s Capital A/c
6,745
 
 
 
Jayesh’s Capital A/c
6,745
20,235
 
1,74,835
 
1,74,835
 
 
 
 

 

Partners’ Capital Accounts
Dr.
Cr.
Particulars
Mahesh
Suresh
Jayesh
Particulars
Mahesh
Suresh
Jayesh
 
 
 
 
 
 
 
 
Realisation A/c
53,000
43,500
25,000
Balance b/d
82,500
30,000
21,000
Realisation A/c (Loss)
6,745
6,745
6,745
Realisation A/c (Loan paid)
 
 
4,635
Bank A/c
22,755
 
 
Bank A/c
 
20,245
6,110
 
82,500
50,245
31,745
 
82,500
50,245
31,745
 
 
 
 
 
 
 
 

 

Bank Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Balance b/d
9,600
Realisation A/c (Liabilities)
20,200
Realisation A/c (Assets)
7,000
Mahesh’s Capital A/c
22,755
Capital A/cs:
 
 
 
Suresh
20,245
 
 
 
Jayesh
6,110
26,355
 
 
 
42,955
 
42,955
 
 
 
 

 



Page No 186:

Question 8:

PRACTICAL PROBLEMS

Gautam, Viral and Ashwin were Partners sharing profits and losses equally. Their Balance sheet as on 31st December, 2011 was as follows:

Balance Sheet as on 31st December, 2011

 

Liabilities
Amount
Rs
Assets
Amount
Rs
Capital Accounts:
 
Building
73,900
Gautam
75,000
Furniture
44,100
Virat
45,000
Stock
25,400
Reserve Fund
27,000
Debtors
33,600
Creditors
48,500
Cash
15,000
Bank Loan
11,500
Ashwin’s Capital
15,000
 
2,07,000
 
2,07,000
 
 
 
 

The firm was dissolved due to insolvency of Ashwin and the following was the result.

(i) The realisation of Assets were as follows:

a) The stock was completely damaged and could realise worth Rs 16,500 only.

b) Building was sold for Rs 49,800.

c) Furniture was realised by the firm at Rs 23,100 less than the book value.

d) A Customer who owes Rs 14,400 became insolvent and nothing could be recovered from his private estate.

(ii) Creditors were paid for Rs 36,900 in full settlement and Bank Loan was discharged fully.

(iii) The expenses of realisation Rs 4,100

(iv) Ashwin became insolvent and the firm could recover only Rs 4,000 from his private estate.

Prepare Realisation A/c, Partner’s Capital A/c and cash A/c to close the books of the firm.

Answer:

Realisation Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Sundry Assets:
 
Sundry Liabilities:
 
Building
73,900
 
Creditors
48,500
 
Furniture
44,100
 
Bank Loan
11,500
60,000
Stock
25,400
 
 
 
Debtors
33,600
1,77,000
Bank A/c:
 
 
 
Stock
16,500
 
Bank A/c:
 
Building
49,800
 
Creditors
36,900
 
Furniture
21,000
 
Bank Loan
11,500
 
  Debtors
19,200
1,06,500
Realisation Expenses
4,100
52,500
 
 
 
 
 
Loss transferred to:
 
 
 
 
Gautam’s Capital A/c
21,000
 
 
 
Virat’s Capital A/c
21,000
 
 
 
Ashwin’s Capital A/c
21,000
63,000
 
2,29,500
 
2,29,500
 
 
 
 

 

Partners’ Capital Accounts
Dr.
Cr.
Particulars
Gautam
Virat
Ashwin
Particulars
Gautam
Virat
Ashwin
 
 
 
 
 
 
 
 
Balance b/d
 
 
15,000
Balanace b/d
75,000
45,000
 
Realisation A/c (Loss)
21,000
21,000
21,000
Reserve fund
9,000
9,000
9,000
Ashwin’s Capital A/c
11,500
11,500
 
Cash
 
 
4,000
Bank A/c
51,500
21,500
 
Gautam’s Capital A/c
 
 
11,500
 
 
 
 
Virat’s Capital A/c
 
 
11,500
 
84,000
54,000
36,000
 
84,000
54,000
36,000
 
 
 
 
 
 
 
 

 

Cash/Bank Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Balance b/d
15,000
Realisation A/c (Liabilities)
52,500
Realisation A/c (Assets)
1,06,500
Capital A/cs:
 
Ashwin’s Capital A/c
4,000
Gautam
51,500
 
 
 
Virat
21,500
73,000
 
1,25,500
 
1,25,500
 
 
 
 

Working Notes:
Calculation of Capital Deficiency

Page No 186:

Question 9:

PRACTICAL PROBLEMS

(When one partner becomes insolvent)

Rahul, Rohit and Ramesh were partners in a firm sharing profit and losses in the ratio of 2:2:1 respectively.
The Balance Sheet as on 31st March, 2012 was as follows:

Balance Sheet as on 31st December, 2011
 
Liabilities
Amount
Rs
Assets
Amount
Rs
Sundry Creditors
20,000
Cash at Bank
8,000
Bills payable
5,000
Stock
20,000
General Reserve
6,000
Debtors
16,000
 
Rahul’s Loan A/c
16,000
Less: R.D.D.
1,000
15,000
Capital Account
 
Plant and Machinery
30,000
Rahul
25,000
Furniture
6,000
Rohit
10,000
Ramesh’s Capital A/c
3,000
 
82,000
 
82,000
 
 
 
 

The firm was dissolved on the above date:

1) The Assets realised as follows:

    Debtors Rs 9,000, Plant and Machinery Rs 26,000, Stock Rs 14,000 and Furniture Rs 3,000.

2) The Creditors were paid Rs 18,000 in full settlement and the bills payable were paid in full.

3) The realisation expenses amounted to Rs 3,000.

4) Ramesh become insolvent and was able to bring in only Rs 1,800 from his private estate.
 
Prepare:

1) Realisation A/c

2) Bank A/c and

3) Partner’s Capital A/c

Answer:

Realisation Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Sundry Assets:
 
Sundry Liabilities:
 
Debtors
16,000
 
Sundry Creditors
20,000
 
Stock
20,000
 
Bills Payable
5,000
 
Plant and Machinery
30,000
 
Reserve for Doubtful Debts
1,000
26,000
Furniture
6,000
72,000
 
 
 
 
 
Bank A/c:
 
Bank A/c:
 
Debtors
9,000
 
Sundry Creditors
18,000
 
Plant and Machinery
26,000
 
Bills Payable
5,000
 
Stock
14,000
 
Realisation Expenses
3,000
26,000
Furniture
3,000
52,000
 
 
 
 
 
 
Loss transferred to:
 
 
 
Rahul’s Capital A/c
8,000
 
 
 
Rohit’s Capital A/c
8,000
 
 
 
Ramesh’s Capital A/c
4,000
20,000
 
98,000
 
98,000
 
 
 
 

 

Partners’ Capital Accounts
Dr.
Cr.
Particulars
Rahul
Rohit
Ramesh
Particulars
Rahul
Rohit
Ramesh
 
 
 
 
 
 
 
 
Balance b/d
 
 
3,000
Balance b/d
25,000
10,000
 
Realisation A/c (Loss)
8,000
8,000
4,000
General Reserve
2,400
2,400
1,200
Ramesh’s Capital A/c
2,000
2,000
 
Bank A/c
 
 
1,800
Bank A/c
17,400
2,400
 
Rahul’s Capital A/c
 
 
2,000
 
 
 
 
Rohit’s Capital A/c
 
 
2,000
 
27,400
12,400
7,000
 
27,400
12,400
7,000
 
 
 
 
 
 
 
 

 

Bank Account
Dr.
 
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Balance b/d
8,000
Realisation A/c (Liabilities)
26,000
Realisation A/c (Assets)
52,000
Capital A/cs:
 
Ramesh’s Capital A/c
1,800
Rahul
17,400
 
 
 
Rohit
2,400
19,800
 
 
Rahul’s Loan A/c
16,000
 
61,800
 
61,800
 
 
 
 

 

Rahul’s Loan Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Bank A/c
16,000
Balance b/d
16,000
 
16,000
 
16,000
 
 
 
 

 

Working Notes:
 
Capital Deficiency of Ramesh
   Rs
Debit balance of Ramesh
7,000
Less: General Reserve
1,200
 
5,800
Less: Cash brought in by Ramesh
1,800
Capital Deficiency
4,000


Capital Deficiency of Rs 4,000 to be distributed between Rahul and Rohit (Solvent Partners) in the ratio 2:2.



Page No 187:

Question 10:

PRACTICAL PROBLEMS

(When all partners become insolvent)

Shiv, Sadashiv and Sadanand are Partners in a firm sharing Profit and Losses equally whose Balance-sheet as on 31st December, 2011 stood as follows:

Balance Sheet as on 31st December, 2011
 
Liabilities
Amount
Rs
Assets
Amount
Rs
Capital Accounts
 
Sadanand’s Capital A/c
2,000
Shiv
6,000
Buildings
18,300
Sadashiv
4,000
Machinery
12,700
Parvati’s Loan
10,000
Debtors
9,100
Sundry Creditors
30,000
Bank
7,900
 
50,000
 
50,000
 
 
 
 

Shiv, Sadashiv and Sadanand were declared bankrupt and hence the firm was dissolved as on that date:

(i) The sundry Assets realised as follows:

     Building Rs 10,900, Machinery Rs 8,200, Debtors Rs 6,800.

(ii) Realisation expenses amounted to Rs 1,300.

(iii) Sadanand was unable to contribute anything-

Whereas Rs 1,100 and Rs 900 were recovered from the realisation of private estate of Shiv and Sadashiv respectively.

You are required to close the books of the firm.

Answer:

Realisation Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Sundry Assets:
 
Bank A/c:
 
Building
18,300
 
Building
10,900
 
Machinery
12,700
 
Machine
8,200
 
Debtors
9,100
40,100
Debtors
6,800
25,900
 
 
 
 
Bank A/c (Realisation Expenses)
1,300
Loss transferred to:
 
 
 
Shiv’s Capital A/c
5,167
 
 
 
Sadashiv’s Capital A/c
5,167
 
 
 
Sadanand’s Capital A/c
5,166
15,500
 
41,400
 
41,400
 
 
 
 

 

Partners’ Capital Accounts
Dr.
Cr.
Particulars
Shiv
Sadashiv
Sadanand
Particulars
Shiv
Sadashiv
Sadanand
 
 
 
 
 
 
 
 
Balance b/d
 
 
2,000
Balance b/d
6,000
4,000
 
Realisation A/c (Loss)
5,167
5,167
5,166
Bank A/c
1,100
900
 
Deficiency A/c
1,933
 
 
Deficiency A/c
 
267
7,166
 
7,100
5,167
7,166
 
7,100
5,167
7,166
 
 
 
 
 
 
 
 

 

Bank Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Balance b/d
7,900
Realisation A/c (Realisation Expenses)
1,300
Realisation A/c (Assets)
25,900
Sundry Creditors
25,875
 
 
Parvati’s Loan A/c
8,625
Capital A/cs
 
 
 
Shiv
1,100
 
 
 
Sadashiv
900
2,000
 
 
 
35,800
 
35,800
 
 
 
 

 

Sundry Creditors Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Bank A/c
25,875
Balance b/d
30,000
Deficiency A/c
4,125
 
 
 
30,000
 
30,000
 
 
 
 

 

Parvati’s Loan Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Bank A/c
8,625
Balance b/d
10,000
Deficiency A/c
1,375
 
 
 
10,000
 
10,000
 
 
 
 

 

Deficiency Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Sadashiv’s Capital A/c
267
Shiv’s Capital A/c
1,933
Sadanand’s Capital A/c
7,166
Sundry Creditors A/c
4,125
 
 
Parvati’s Loan A/c
1,375
 
 
 
 
 
7,433
 
7,433
 
 
 
 

Working Notes:



Page No 188:

Question 11:

PRACTICAL PROBLEMS

Ganga, Yamuna and Godavari are in Partnership sharing profits and losses equally. Their Balance sheet as on 31st December, 2011 was as follows:

Balance Sheet as on 31st December, 2011
 

Liabilities

Amount

Rs

Assets

Amount

Rs

Capital Accounts

 

Currnet Accounts

 

Ganga

25,000

Yamuna

20,000

Yamuna

10,000

Godavari

4,000

Godavari

5,000

Premises

17,200

Ganga’s Currnet A/c

3,000

Machinery

10,800

Sundry Creditors

4,000

Debtors

9,600

Bank loan

3,000

Cash

6,400

 

50,000

 

50,000

 

 

 

 

Godavari was declared insolvent and hence the firm was dissolved as on that date. Premises was sold at Rs 14,800, Machinery realised Rs 6,400. Bad debts and discount allowed to Debtors amounted to Rs 1,600. Sundry creditors agreed to receive 80 paise in a rupee (Rs) in full satisfaction of their claim. Bank Loan was settled at 60% of book value. During the course of dissolution a liability under an action for damages was settled for Rs 1,400 against Rs 2,100 provided in the books of the firm. The expenses of realisation amounted to Rs 900. Goodwill contributed Rs 1,900 from her private Property.

Prepare necessary ledger accounts in the books of the firm.

Answer:

Realisation Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Sundry Assets:
 
Sundry Liabilities:
 
Premises
17,200
 
Sundry Creditors
4,000
 
Machinery
10,800
 
Bank Loan
3,000
7,000
Debtors
9,600
37,600
 
 
 
 
 
Bank A/c:
 
Bank A/c:
 
Premises
14,800
 
Sundry Creditors
3,200
 
Machinery
6,400
 
Bank Loan
1,800
 
Debtors
8,000
29,200
Realiation Expenses
900
 
 
 
Damages
1,400
7,300
Loss transferred to:
 
 
 
Ganga’s Capital A/c
2,900
 
 
 
Yamuna’s Capital A/c
2,900
 
 
 
Godavari’s Capital A/c
2,900
8,700
 
44,900
 
44,900
 
 
 
 
 
Partners’ Current Accounts
Dr.
Cr.
Particulars
Ganga
Yamuna
Godavari
Particulars
Ganga
Yamuna
Godavari
 
 
 
 
 
 
 
 
Balance b/d
 
2,000
4,000
Balance b/d
3,000
 
 
Realisation A/c (Loss)
2,900
2,900
2,900
Cash A/c
 
 
1,900
Capital A/c
100
 
 
Capital A/c
 
4,900
5,000
 
3,000
4,900
5,000
 
3,000
4,900
5,000
 
 
 
 
 
 
 
 
 
Partners’ Capital Accounts
Dr.
Cr.
Particulars
Ganga
Yamuna
Godavari
Particulars
Ganga
Yamuna
Godavari
 
 
 
 
 
 
 
 
Current A/c
 
4,900
5,000
Balance b/d
25,000
10,000
5,000
Cash A/c
25,100
5,100
 
Current A/c
100
 
 
 
25,100
10,000
5,000
 
25,100
10,000
5,000
 
 
 
 
 
 
 
 
 
Cash/Bank Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
 
 
 
 
Balance b/d
6,400
Realisation A/c (Liabilities)
7,300
Realiation A/c (Assets)
29,200
Capital A/cs:
 
Godavari’s Capital A/c
1,900
Ganga
25,100
 
 
 
Yamuna
5,100
30,200
 
37,500
 
37,500
 
 
 
 
 
Working Notes:
 
Capital deficiency of Godavari
    Rs
Capital A/c Cr. Balance
5,000

Add: Amount contributed

1,900
 
6,900
Less: Debit Balance of current A/c
4,000
 
2,900
Less: Realisation Loss
2,900
It is needless to transfer solvent partner’s capital A/c
NIL
 



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