Dissolution of a partner (Question Bank)

Dissolution of a partner 

One partner, Ramesh is ready to pay the Bills Payable ₹8,000 at the time of dissolution. Actual value of Bills payable was ₹10,000. Entry will be:

1.  

Realisation A/c	Dr.	8,000
To Ramesh's Capital A/c			8,000

2.  
3.  

Realisation A/c	Dr.	10,000
To Ramesh's Capital A/c			10,000

4.  
5.  

Realisation A/c	Dr.	2,000
To Ramesh's Capital A/c			2,000

6. No Entry

 

---

Following accounts will be shown on debit side of Realisation Account except

1. Cash Received from Sale of Assets
2. Cash Payments of Liabilities
3. If any partner has taken over any liability
4. Realisation Expenses

 

---

At the time of dissolution, how would you treat the loss shown by Profit and Loss A/c in the Balance Sheet?

1. Dr. Side of Partners capital account
2. Realisation Account
3. Cash Account
4. Credit side of partners’ capital account

 

---

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:

1. Credited to Rohan's Capital Account
2. Debited to Realisation Account
3. Credited to Realisation Account
4. Credited to Bank Account

[2020]

 

---

What should be the journal entry when A takes over loan payable to Mrs. A ₹20,000

1.  

Realisation A/c	Dr.	20,000
To A's Capital A/c			20,000

2.  
3.  

Realisation A/c	Dr.	58,000
To Bank A/c			58,000

4.  
5.  

Bank A/c	Dr.	58,000
To A's Capital A/c			58,000

6.  
7.  

Loan A/c	Dr.	58,000
To A's Capital A/c			58,000

 

---

Under Garner Vs Murry Rule, the insolvency loss should be borne by solvent partners according to:

1. Capital ratio
2. Profit sharing ratio
3. Final claims ratio
4. Maximum loss ratio

 

---

Unrecorded liability will be shown in:

1. Debit side of Realisation A/c
2. Credit side of Realisation A/c
3. Debit side of cash A/c
4. Debit side of partners’ capital A/c

 

---

Provision for doubtful debts appearing at the time of dissolution of a firm transferred to:

1. Realisation A/c
2. Cash A/c
3. Bank A/c
4. None of these

 

---

When the Realised value of an asset is not given, it should be taken at ________.

1. Nil or zero
2. Book Value
3. Market Value
4. Both Book Value and Market Value

 

---

At the time of dissolution of the firm, loan from partner is:

1. transferred to Realisation Account
2. not transferred to Realisation Account
3. transferred to the Partner's Capital Account
4. Transferred to credit side of cash a/c

 

---

Following is the Balance sheet of K and S who share profits and losses equally as on 31st March 2010. The firm was dissolved. Debtors realized Rs 31,500 (with interest) and Rs 1200 was recovered for bad debts written off last year. The balance sheet show debtors amounted Rs 25000. By what amount Bank A/c (Debtors realised) should be shown on the credit side of the realization account?

1. 31500
2. 32500
3. 36200
4. 36000

 

---

Compulsory dissolution will take place when ________.

1. Business of the firm becomes unlawful
2. There is change in profit sharing ratio
3. A partner dies
4. A partner retires

 

---

After which account it is assumed that dissolution of the firm stands closed?

1. Cash A/c
2. Partners Capital A/c
3. Realisation A/c
4. Memorandum Balance Sheet

 

---

What journal entry will take place when a loan of partner ₹60,000 is paid at the time of dissolution?

1. Partner’s Loan A/c Dr.
   To Cash/Bank A/c
2. Partner’s Capital A/c Dr.
   To Cash/Bank A/c
3. Realisation A/c Dr.
   To Cash/Bank A/c
4. Cash/Bank A/c Dr
   To Realisation A/c

 

---

Unrecorded asset when realised (in cash) will be ________.

1. Credited to Realisation Account
2. Debited to Realisation Account
3. Debited to Partners capital account
4. Credited to partners capital account

 

---

Unrecorded Asset taken over by the partner will not be shown in:

1. Cash A/c
2. Partners Capital A/c
3. Realisation A/c
4. None of these

 

---

Creditor’s paid 42000 in full settlement of Rs 45000. The Journal entry should be:

1.  

Realisation A/c	Dr.	42,000
To Bank A/c			42,000

2.  
3.  

Realisation A/c	Dr.	50,000
To Bank A/c			50,000

4.  
5.  

Realisation A/c	Dr.	45,000
To Bank A/c			45,000

6.  
7.  

Realisation A/c	Dr.	3,000
To Bank A/c			3,000

 

---

Total creditors of the firm (already transferred to Realisation Account) were ₹30,000. Out of this, creditors waived their claim of ₹5,000 while the rest agreed to allow discount @ 10% of their respective claim. Journal Entry would be

1.  

Mohan's Capital A/c	Dr.	22,500
To Realisation A/c			22,500

2.  
3.  

Bank A/c	Dr.	22,500
To Realisation A/c			22,500

4.  
5.  

Realisation A/c	Dr.	25,000
To Bank A/c			25,000

6.  
7.  

Bank A/c	Dr.	25,000
To Realisation A/c			25,000

 

---

Proportionate Capital Method is otherwise called:

1. Relative capital Method
2. Maximum loss method
3. Balance method
4. None of these

 

---

In which circumstances partners’ can dissolve the firm without the interference of the court?

1. Mutual Agreement
2. When a partner has become of unsound mind
3. When a partner is found guilty of breath of contract frequently
4. When business of the firm cannot be carried on except at a loss

 

---

Vinod (one partner) agreed to take a creditor of ₹50,000 for 45,000. How would you record this transaction?

1.  

Realisation A/c	Dr.	45,000
To Vinod's Capital A/c			45,000

2.  
3.  

Realisation A/c	Dr.	50,000
To Vinod's Capital A/c			50,000

4.  
5.  

Realisation A/c	Dr.	5,000
To Vinod's Capital A/c			5,000

6. No entry

 

---

All the assets of the firm are ________ and all outsiders’ liabilities and partners’ loan and partners capitals are ________ at the time of dissolution of the firm.

1. Realised, Paid
2. Disposed Off, Acquired
3. Acquired, Paid
4. Paid, Disposed Off

 

---

Realisation Account is:

1. Nominal Account
2. Real Account
3. Personal Account
4. P/L Adjustment A/c

 

---

When the realized value of goodwill is given in adjustment, it indicates that ________.

1. Goodwill is sold
2. Goodwill is purchased
3. Goodwill is written off by the old partners
4. Goodwill is taken over by creditors

 

---

One Creditor worth ₹4,500 took over stock valued at Rs.5,200 in full satisfaction of his claim.

1. No Entry is required
2.  

Creditors A/c	Dr.	4,500
To Bank A/c			4,500

3.  
4.  

Creditor A/c	Dr.	5,400
To Assets A/c			5,400

5.  
6.  

Creditors A/c	Dr.	4,500
To Realisation A/c			4,500

 

---

If liability is assumed (to be paid) by a partner in such a case partner capital account is ________.

1. Credited
2. Debited
3. Both Credited and Debited
4. No effect on capital account

 

---

Pooja (one partner) agreed to pay off her husband’s loan Rs.14,000. What journal entry should take place for the same?

1.  

Realisation A/c	Dr.	14,000
To Pooja's Capital A/c			14,000

2.  
3.  

Realisation A/c	Dr.	14,000
To Bank A/c			14,000

4.  
5.  

Pooja's Capital A/c	Dr.	14,000
To Realisation A/c			14,000

6.  
7.  

Realisation A/c	Dr.	14,000
To Loan A/c			14,000

 

---

Z one partner was paid remuneration (including expenses) of ₹9,000 to carry out the dissolution of the firm. Actual realization expenses were ₹11,500. How will you record this?

1.  

Realisation A/c	Dr.	9,000
To Z‘s Capital A/c			9,000

2.  
3.  

Realisation A/c	Dr.	11,500
To Z‘s Capital A/c			11,500

4.  
5.  

Realisation A/c	Dr.	2,500
To Z‘s Capital A/c			2,500

6. No Entry

 

---

Joint life policy reserve appearing at the time of dissolution of a firm is transferred to

1. Realisation A/c
2. Liability A/c
3. Capital A/c
4. None of these

 

---

What journal entry will take place when the amount of liability is less than the amount of workmen compensation reserve?

1. Workmen Compensation Reserve A/c Dr.
   To Realisation A/c
   To Partner’s Capital A/c
2. Workmen Compensation Reserve A/c Dr.
   To Bank A/c
   To Partner’s Capital A/c
3. Realisation A/c Dr.
   To Workmen Compensation Reserve
4. Realisation A/c Dr.
   To Partners Capital A/cs
   To Workmen Compensation Reserve

State the accounting treatment at the time of dissolution of a firm for:

1. Unrecorded assets
2. Unrecorded liabilities

[[NCERT Textbook]]

 

---

X and Y are partners in the firm who decided to dissolve the firm. Assets and Liabilities are transferred to Realisation account. Pass necessary journal entries-

1. Creditors were ₹ 1,00,000. They accepted Building valued ₹ 1,40,000 and paid cash to the firm ₹ 40,000
2. Aman, an old customer whose account of ₹ 1000 was written off as bad in the previous year paid 40% of the amount.
3. There were 300 shares of ₹ 10 each in ABC Ltd which were acquired for ₹ 2000 were now valued at ₹ 6 each. These were taken over by the partners in the profit sharing ratio.
4. Profit on Realisation ₹ 42000 was divided among the partners.
5. Land and Building (Book value ₹ 1, 60,000) was sold for ₹ 3,00,000 through a broker who charged 2% commission on the deal.
6. Plant and machinery (Book value ₹ 60,000) was handed over to the creditor in full settlement of his claim.

 

---

Sonu and Ashu sharing profits as 3 : 1 and they agree upon dissolution. The Balance Sheet as on March 31, 2017 is as under:

Balance Sheet of Sonu and Ashu
as on March 31, 2017

Liabilities		Amount ₹	Assets	Amount ₹
Loan		12,000	Cash at Bank	15,000
Creditors		18,000	Stock	45,000
Capital:			Furniture	16,000
Sonu	1,10,000		Debtors	70,000
Ashu	68,000	1,78,000	Plant and Machinery	52,000
			Loan to Ashu	10,000
		2,08,000		2,08,000

Sonu took over the plant and machinery at an agreed value of ₹ 60,000. Stock and Furniture were sold for ₹ 42,000 and ₹ 13,900 respectively. Debtors were taken over by Ashu at ₹ 69,000. Creditors were paid subject to a discount of ₹ 900. Sonu agrees to pay the loans. Realisation expenses were ₹ 1,600.
Prepare Realisation Account, Bank Account, and Capital Accounts of the Partners.

[[NCERT Textbook]]

 

---

Ramesh and Umesh were partners in a firm sharing profits in the ratio of their capitals. On 31st March, 2013, their Balance Sheet was as follows-

Liabilities		₹	Assets	₹
Creditors		1,70,000	Bank	1,10,000
Workmen Compensation Reserve		2,10,000	Debtors	2,40,000
General Reserve		2,00,000	Stock	1,30,000
Ramesh's Current Account		80,000	Furniture	2,00,000
Capital A/cs:			Machinery	9,30,000
Ramesh	7,00,000		Umesh's Current Account	50,000
Umesh	3,00,000	10,00,000
		16,60,000		16,60,000

On the above date the firm was dissolved.

1. Ramesh took over 50% of stock at ₹ 10,000 less than book value. The remaining stock was sold at a loss of ₹ 15,000. Debtors were realised at a discount of 5%.
2. Furniture was taken over by Umesh for ₹ 50,000 and machinery was sold for ₹ 4,50,000.
3. Creditors were paid in full.
4. There was an unrecorded bill for repairs for ₹ 1,60,000 which was settled at ₹ 1,40,000. Prepare Realisation Account,

 

---

Achal and Vichal were partners in a firm sharing profits in the ratio of 3 : 5. On 31st March 2019, their Balance Sheet was as follows :

Balance sheet of Achal and vichal
as at 31st March, 2019

Liabilities		(₹)	Assets	₹
Capital A/cs:			Land and Building	4,00,000
Achal	3,00,000		Machinery	3,00,000
Vichal	5,00,000	8,00,000	Debtors	2,22,000
Creditors		1,79,000	Cash at Bank	78,000
Employees's Provident Fund		21,000
		10,00,000		10,00,000

The firm was dissolved on 1st April, 2019 and the Assets and Liabilities were settled as follows:

1. land and Building realised ₹ 4,30,000;
2. Debtors realised ₹ 2,25,000 (with interest) and ₹ 1,000 were recovered for Bad Debts written off last year;
3. There was an Unrecorded Investment which was sold for ₹ 25.000.
4. Vichal took over Machinery at ₹ 2,80,000 for cash;
5. 50% of the Creditors were paid ₹ 4,000 less in full settlement and the remaining Creditors were paid full amount.

Pass Necessary Journal Entries for dissolution of the firm.

 

---

Ram and Shyam were partners in a firm sharing profits in the ratio of 2 : 3 respectively. They become old and no one was there to look after their business. Therefore, they decided to dissolve the business and donate the amount available to an NGO who are providing service for growing trees in urban areas to control pollution. On 31st January, 2014, their balance sheet was as follows

Balance Sheet
as at 31st January, 2014

Liabilities		Amt (Rs.)	Assets	Amt (Rs.)
Creditors		65,000	Land	1,20,000
Bills Payable		35,000	Machinery	65,000
Capital A/ cs			Goodwill	10,000
Ram	75,000		Stock	25,000
Shyam	75,000	1,50,000	Debtors	20,000
			Cash	10,000
		2,50,000		2,50,000

Ram paid the creditors at a discount of 15% and Shyam paid bills payable in full. Assets realised as follows: Land at 20% less; machinery at Rs. 35,000; stock at 25% less and debtors at Rs. 12,500. Expenses on realisation Rs. 1,750 were paid by Shyam.
Prepare realisation account, partner’s capital accounts and bank account. Also, identify any one value which the partners communicated to the society.

[2014]

 

---

The amount of sundry assets transferred to Realisation Account was Rs 80,000. 60% of them have been sold at a profit of Rs. 2,000. 20% of the remaining were sold at a discount of 30% and remaining were taken over by Ramlal (a partner) at book value. Journalise.

 

---

The book value of assets (other than cash and bank) transferred to Realisation Account is ₹ 1,00,000. 50% of the assets are taken over by a partner Atul, at a discount of 20%; 40% of the remaining assets are sold at a profit of 30% on cost; 5% of the balance being obsolete, realised nothing and remaining assets are handed over to a Creditor, in full settlement of his claim.
You are required to record the journal entries for Realisation of assets.
[Hints:

1. Dr. Realisation A/c and Cr. Sundry Assets A/c by ₹ 1,00,000.
2. Dr. Atul's Capital A/c and Cr. Realisation A/c by ₹ 40,000 [(50/100 ×× ₹ 1,00,000) - 20% of ₹ 50,000].
3. Dr. Bank A/c and Cr. Realisation A/c by ₹ 26,000 [(40% of ₹ 50,000) + 30% of ₹ 20,000].
4. No Entry will be passed for 5% of remaining assets being obsolete and remaining assets handed over to a creditor in full settlement.]

[[NCERT Textbook]]

 

---

P and Q were partners in a firm. Pass journal entries for the following transactions on dissolution of the firm after various assets and external liabilities have been transferred to Realisation A/c:

1. X, an unrecorded creditor of ₹ 10,000 was paid by partner P at a discount of 20%.
2. Y, an unrecorded creditor of ₹ 25,000, took over Computer at ₹ 30,000. Balance was paid by him in Cash.
3. Computer of ₹ 25,000 and a Vehicle of ₹10,000 were appearing in the Balance Sheet but no other additional information was given regarding these items.
4. A creditor to whom ₹ 10,000 were to be paid accepted an unrecorded asset of ₹ 15,000 in full settlement of his claim.
5. An unrecorded asset of ₹ 35,000 was given to an unrecorded creditor of ₹ 50,000 in settlement of his claim of ₹ 30,000 and the balance was paid to him in cash.
6. P’s loan was appearing on the liabilities side of the Balance Sheet at ₹ 50,000. He accepted an unrecorded asset of ₹ 40,000 at ₹ 35,000 and the balance was paid to him in Cash.

 

---

Prakash, Kiran and Rishab are partners in a firm sharing profit and losses in the ratio of 3 : 2 : 1. They decided to dissolve the firm on 1st November, 2018. From the information given below complete Realisation A/c, Partner’s Capital Accounts and Bank A/c:

REALISATION ACCOUNT

Dr.			Cr.
Particulars		₹	Particulars		₹
To Sundry Assets:			By Creditors	27,000
Debtors	20,000		By Bills Payable	10,000
Stock	25,200		By Mrs. Prakash Loan	5,000	42,000
Investments	20,000		By Bank (Assets realised):		?
Bills Receivable	8,000		By Kiran’s Capital A/c (Bills Receivable)		7,000
Machinery	60,000		By Bank (Unrecorded Asset)		1,200
Goodwill	6,000	1,39,200	By Bank (Goodwill)		5,000
To Kiran’s Capital A/c:			By Loss transferred to:
Bills Payable	10,000		Prakash’s Capital A/c	?
Realisation Expenses	2,100	12,100	Kiran’s Capital A/c	?
Wife's Loan	5,000		Rishab's Capital A/c	?
Contingent liability for bill discounted	8,000	13,000
To Bank (Creditors)
		1,86,800			1,86,800

PARTNER’S CAPITAL ACCOUNTS

Dr.				Cr.
Particulars	Prakash	Kiran	Rishab	Particulars	Prakash	Kirna	Rishab
	₹	₹	₹		₹	₹	₹
To Bal. b/d			6,000	By ?	75,000	50,000
To P & L A/c	9,900	?	3,300	By Realisation A/c (B/P and Realisation exp.)		?
To Realisation A/c (Bills Receivable)		?		By Realisation A/c (Wife Loan & contingent liability)	?
To Realisation A/c (Loss)	19,200	12,800	6,400	By Bank A/c (Amount brought in)			?
To Bank A/c (Final Payment)	?	?
	88,000	62,100	15,700		88,000	62,100	15,700

BANK ACCOUNTS

Dr.		Cr.
Particulars	₹	Particulars	₹
To	?	By Realisation A/c (Creditors)	?
To	?	By Prakash's Capital A/c	?
To	?	By Kirna's Capital A/c	35,700
To	?
To Rishab's Capital A/c	?
	1,17,100		1,17,100

 

Balance Sheet of a firm as at 31st March 2019, when it was decided to dissolve the same, was

Liabilities		₹	Assets	₹
Sundry Creditors		14,000	Cash at Bank	640
General		500	Stock	4,740
Capital Accounts X	4,000		Debtors	5,540
Y	3,000	7,000	Machinery	10,580
		21,500		21,500

₹ 19,500 were realised from all assets except Cash at Bank. The cost of winding up came to ₹ 440, X and Y shared profits in the ratio of 2 : 1 respectively. Prepare Realisation A/c and Capital Accounts of partners.

 

---

Journalise the following transactions regarding Realisation expenses:

1. Realisation expenses amounted to ₹ 2,500.
2. Realisation expenses amounting to ₹ 3,000 were paid by Ashok, one of the partners.
3. Realisation expenses ₹ 2,300 borne by Tarun, personally.
4. Amit, a partner was appointed to realise the assets, at a cost of ₹ 4,000. The actual amount of Realisation amounted to ₹ 3,000.

[[NCERT Textbook]]

 

---

X Ltd has Rs. 10,00,000, 9% debentures due to be redeemed out of profits on 1st October, 2009 at a premium of 5%. The company had a debenture redemption reserve of Rs. 4,14,000. Pass necessary journal entries at the time of redemption.

[2010]

 

---

A, B and C were equal partners On 31st March 2019 their balance sheet stood as:

Liabilities	₹	Assets	₹
Creditors	50,400	Cash	3,700
Reserve	12,000	Stock	20,100
Capital A /c:		Debtors	62,600
A	40,000	Loan to A	10,000
B	25,000	Investments	16,000
C	15,000	Furniture	6,500
		Building	23,500
Total	1,42,400	Total	1,42,400

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

1. For the purpose of dissolution Investments were valued at ₹ 18,000 and A took over the investments at this value,
2. Fixed Assets realised ₹ 29,700 whereas Stock and Debtors realised ₹ 80,000.
3. Expenses of Realisation amounted to ₹ 1,300.
4. Creditors allowed a discount of ₹ 800.
5. One bill receivable for ₹ 1,500 under discount was dishonoured as the acceptor had become insolvent and was unable to pay anything and hence the bill had to be met by the firm.

Prepare the Realisation Account, Cash Account and Partners' Capital Accounts showing how the accounts would finally be settled among the partners

 

---

Sumit, Amit and Vinit are partners sharing profit in the ratio of 5 : 3 : 2. Their Balance Sheet as on March 31, 2017 was as follows:

Balance Sheet of Sunit, Amit and Vinit
as on March 31, 2017

Liabilities		Amount ₹	Assets	Amount ₹
Capitals:			Machinery	80,000
Sumit	40,000		Investments	1,50,000
Amit	50,000		Stock	10,000
Vinit	40,000	1,50,000	Debtors	35,000
Profit and Loss		10,000	Cash at bank	15,000
Mr. Amit’s loan		40,000
Sundry creditors		90,000
		2,90,000		2,90,000

The firm was dissolved on that date. Amit took over his wife’s loan. One of the Creditors for ₹ 2,600 did not claim the amount. Assets realised as follows:

1. Machinery was sold for ₹ 70,000,
2. Investments with book value of ₹ 1,00,000 were given to Creditors in full settlement of their account. The remaining Investments were taken over by Vinit at an agreed value of ₹ 45,000,
3. Stock was sold for ₹ 11,000 and Debtors for ₹ 3,000 proved to be bad,
4. Realisation expenses were ₹ 1,500.
   Prepare ledger accounts to close the books of the firm.

[[NCERT Textbook]]

 

---

Anup and Sumit are equal partners in a firm. They decided to dissolve the partnership on March 31, 2017. When the balance sheet is as under:

Balance Sheet of Anup and Sumit as on March 31, 2017

Liabilities		Amount ₹	Assets	Amount ₹
Sundry Creditors		27,000	Cash at bank	11,000
General Reserve		10,000	Sundry Debtors	12,000
Loan		40,000	Plants	47,000
Capital			Stock	42,000
Anup	60,000		Lease hold land	60,000
Sumit	60,000	1,20,000	Furniture	25,000
		1,97,000		1,97,000

The Assets were realised as follows:
Lease hold land = 72,000
Furniture = 22,500
Stock = 40,500
Plant = 48,000
Sundry Debtors = 10,500
The Creditors were paid ₹ 25,500 in full settlement. Expenses of realisation amount to ₹ 2,500.
Prepare Realisation Account, Bank Account, Partners Capital Accounts to close the books of the firm.

[[NCERT Textbook]]

 

---

The following is the Balance Sheet of A and B as at 31st March 2018. The profit-sharing ratios of the partners are 3 : 2.

Liabilities	₹	₹	Assets	₹	₹
Creditors		97,500	Land & Buildings		30,000
Capital Accounts:			Motor Vehicles		18,300
A	87,000		Stock		72,800
B	63,000	1,48,000	Debtors	1,13,200
			Less: Provision for Bad Debts	2,450	1,10,550
			Cash at Bank		13,650
		2,45,500			2,45,500

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 Partners’ Capital Accounts to close the books of the firm as a result of its dissolution.
Hint: Amount realised from Debtors ₹ 1,13,200.

 

---

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.

[2020]

 

---

Aman and Harsh 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 third party liabilities have been transferred to Realisation A/c.

1. There was furniture worth ₹ 50,000. Aman took over 50% of the furniture at 10% discount and the remaining furniture was sold at 30% profit on book value.
2. Profit and Loss Account was showing a credit balance of ₹ 15,000 which was distributed between the partners.
3. Harsh’s loan of ₹ 6,000 was discharged at ₹ 6,200.
4. The firm paid realization expenses amounting to ₹ 5,000 on behalf of Harsh who had to bear these expenses.
5. There was a bill for ₹ 1,200 under discount. The bill was received from Soham who proved insolvent and a first and final dividend of 25% was received from his estate.
6. Creditors, to whom the firm owed ₹ 6,000, accepted stock of ₹ 5,000 at a discount of 5% and the balance in cash.
7. The loss on dissolution was ₹ 8,000.

 

---

Explain the process of dissolution of the partnership firm.

[[NCERT Textbook]]

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%.

 

---

Ram, Rahim and Rehman were partners in a firm sharing profits in the ratio of 4 : 1 : 5. On 28.2.2019 the firm was dissolved. From the information given below complete Realisation Account, Capital Accounts and Bank Account:

REALISATION ACCOUNT

Dr.			Cr.
Particulars		₹	Particulars		₹
To Sundry Assets:			By Sundry Liabilities:
Debtors A/c	2,74,000		Provision for Bad Debts	8,000
Stock A/c	1,08,000		Bank Loan	4,34,000
Furniture A/c	1,32,000		Creditors	3,80,000	8,22,000
Machinery	4,00,000		By Bank (Assets realised)		35,61,800
Building	30,00,000	39,14,000	By Ram’s Capital A/c (Furniture)		?
To Bank (Payment of Bank Loan)		4,43,500	By Rehman's Capital (Machinery taken)		?
To Bank A/c (Payment of Creditors)		?	By Loss transferred to:
To Rehman's Capital A/c (Realisation Expenses)		?	Ram's Capital A/c	29,080
			Rahim's Capital A/c	?
			Rehman's Capital A/c	?	?
		?			?

CAPITAL ACCOUNTS

Dr.				Cr.
Particulars	Ram	Rahim	Rehman	Particulars	Ram	Rahim	Rehman
	₹	₹	₹		₹	₹	₹
To Realisation A/c (Furniture taken)	79,000			By	?	6,00,000	10,00,000
To Realisation A/c (Machinery taken)			?	By General Reserve	56,000	?	?
To	?	?	?
To Bank A/c	?	?	?
	?	?	?		14,56,000	?	10,77,000

BANK ACCOUNTS

Dr.		Cr.
Particulars	₹	Particulars	₹
To	?	By	?
To	?	By Realisation A/c (Payment of Creditors)	3,61,000
		By	?
		By	?
		By	?
	?		?

 

---

Balance Sheet of P, Q and R as at March 31, 2019 who were sharing profits in the ratio of 5 : 3 :1

Liabilities		₹	Assets		₹
Bills Payable		40,000	Building		40,000
Loan from Bank		30,000	Plant and Machinery		40,000
General Reserve		9,000	Stock		19,000
Capitals A/cs:			Sundry Debtors	42,000
P	44,000		Less : Provision for Doubtful Debts	2,000	40,000
Q	36,000		Cash at Bank		40,000
R	20,000
		1,79,000			1,79,000

The Partners dissolved the business. Total assets realised-Stock ₹ 23,400. Debtors 50%, Fixed Assets 10% less than their book value. Bills Payable were settled for ₹ 32,000. There was an outstanding Bill of Electricity ₹ 800 which was paid off. Realisation expenses ₹ 1,250 were also paid. Prepare Realisation Account, Bank Account and Partners Capital Accounts.

 

---

X and Y were partners in a firm sharing profits and losses in the ratio of 2: 3. They decided to dissolve the firm on 1st May, 2018. From the information given below, complete Realisation Account, Partners' Capital Accounts and Bank Account:

REALISATION ACCOUNT

Dr.		Cr.
Particulars	₹	Particulars		₹
To Stock A/c	60,000	By Provision for Doubtful Debts A/c		5,000
To Debtors A/c	90,000	By Creditors A/c		3,25,000
To Plant and Machinery A/c	1,50,000	By X's Capital A/c (Investment)		40,000
To Investment A/c	50,000	By Bank A/c (Assets):
To Bank A/c (Realisation Expenses)	?	Stock		?
To Bank A/c (Creditors)	3,08,750	Debtors	82,500
		Plant and Machinery	1,35,000	2,57,500
		By Loss transferred to:
		X's Capital A/c (2/5)		?
		Y's Capital A/c (3/5)		?
	6,68,750			6,68,750

PARTNERS CAPITAL ACCOUNTS

Dr.			Dr.
Particulars	X(₹)	Y(₹)	Particulars	X(₹)	Y(₹)
To Profit and Loss A/c	10,000	15,000	By Balance b/d	40,000	50,000
To ?	?		By General Reserve A/c	10,000	15,000
To ?	?	?	By Bank A/c	?
To Bank A/c (Final Payment)		25,250	(Cash Brought in)
	66,500	65,000		65,000	66,500

BANK ACCOUNT

Dr.		Cr.
Particulars	₹	Particulars	₹
To Balance b/d	70,000	By Realisation A/c (Realisation Expenses)	10,000
To Realisation A/c	?	By Realisation A/c (Creditors)	?
To X's Capital A/c (Cash Brought in)	16,500	By Y"s Capital A/c (Final Payment)	?
	3,44,000		3,44,000

 

---

A and B are partners sharing profits and losses equally. They decided to dissolve their firm. Assets and Liabilities have been transferred to Realisation Account. Pass necessary Journal entries for the following.

1. A was to bear all the expenses of Realisation for which he was given a commission of Rs 4000.
2. Advertisement suspense account appeared on the asset side of the Balance sheet amounting Rs 28000
3. Creditors of Rs 40,000 agreed to take over the stock of Rs 30,000 at a discount of 10% and the balance in cash.
4. B agreed to take over Investments of Rs 5000 at Rs 4900
5. Loan of Rs 15000 advanced by A to the firm was paid off.
6. Bank loan of Rs 12000 was paid off.

 

---

Prashant and Rajesh were partners in a firm sharing profits in the ratio of 3 : 2. Inspite of repeated reminders by the authorities, they kept dumping hazardous material into a nearby river. The court ordered for the dissolution of their partnership firm on 31st March, 2012. Prashant was deputed to realise the assets and to pay the liabilities. He was paid Rs. 1,000 as commission for his services. The financial position of the firm on 31st March, 2012 was as follows

Balance Sheet
as at 31st March, 2012

Liabilities		Amt (Rs.)	Assets		Amt (Rs.)
Creditors		80,000	Building		1,20,000
Mrs Prashant's Loan		40,000	Investments		30,600
Rajesh's Loan		24,000	Debtors	34,000
Investment Fluctuation Fund		8,000	(-) Provision for Doubtful Debts	(4,000)	30,000
Capital A/cs			Bills Receivable		37,400
Prashant	42,000		Cash		6,000
Rajesh	42,000	84,000	Profit and Loss A/c		8,000
			Goodwill		4,000
		2,36,000			2,36,000

Following was agreed upon

1. Prashant agreed to pay off his wife’s loan.
2. Debtors realised Rs. 24,000.
3. Rajesh took away all investments at Rs. 27,000
4. Building realised Rs. 1,52,000.
5. Creditors were payable after 2 months. They were paid immediately at 10% discount.
6. Bills receivable were settled at a loss of Rs. 1,400.
7. Realisation expenses amounted to Rs. 2,500.

Prepare realisation account, partners’ capital accounts and cash account to close the books of the firm. Identify the value being conveyed in the question.

[2013]

 

---

Complete the missing figure in the following accounts:

Realisation Account

Dr.				Cr.
Particulars		Rs.	Particulars	Rs.
To Land and Building A/c		11,750	By Accounts Payable	25,200
To Stock A/c		8,000	By Joint Life Policy Reserve A/c	5,000
To Accounts Receivable (Debtors)		10,050	By X's Capital A/c(Stock)	9,000
To Investments A/c		31,350	By Y's Capital A/c(Building)	8,750
To Office Equipments A/c		--	By Z's Capital A/c(Debtors)	1,850
To Bank A/c		225	By Bank A/c(28,500 + 12,500)	41,000
To Bank A/c(25,200 + 250)		25,450
To Capital A/cs(Profit)
X	3/6 ---
Y	2/6---
Z	1/6--	2,175
		---		---

Partner's Capital Account

Dr.							Cr.
Particulars	X(Rs.)	Y(Rs.)	Z(Rs.)	Particulars	X(Rs.)	Y(Rs.)	Z(Rs.)
To Realisation A/c	--	--	--	By Balance b/d	15,000	10,000	5,000
To Bank A/c	10,088	3,975	4,512	By General Reserve	3,000	2,000	1,000
				By Realisation A/c	--	--	--
	19,088	12,725	6,362		19,088	12,725	6,362

Bank Account

Dr.			Cr.
Particulars	Rs.	Particulars	Rs.
To Balance b/d	3,250	By Realisation A/c	2235
To Realisation A/c(Assets Realised)	41,000	By Realisation A/c	25,450
		By X's Capital A/c	--
		By Y's Capital A/c	---
		By Z's Capital A/c	--
	--		--

 

---

Anju, Manju and Sanju sharing profit in the ratio of 3 : 1 : 1 decided to dissolve their firm. On March 31, 2014 their position was as follows:

Balance Sheet Anju, Manju and Sanju
as on March 31, 2017

Liabilities		Amount ₹	Assets		Amount ₹
Creditors		60,000	Cash at Bank		55,000
Loan		15,000	Stock		83,000
Capitals:			Furniture		12,000
Anju	2,75,000		Debtors	2,42,000
Manju	1,10,000		Less: Provision for doubtful debts	12,000	2,30,000
Sanju	1,00,000	4,85,000	Buildings		2,00,000
Manju’s loan		20,000
		5,80,000			5,80,000

It is agreed that:

1. Anju takes over the Furniture at ₹ 10,000 and Debtors amounting to ₹ 2,00,000 at ₹ 1,85,000. Anju also agrees to pay the creditors,
2. Manju is to take over Stock at book value and Buildings at book value less 10%,
3. Sanju is to take over remaining Debtors at 80% of book value and responsibility for the discharge of the loan,
4. The expenses of dissolution amounted to ₹ 2,200.
   Prepare Realisation Account, Bank Account, and Capital Accounts of the partners.

[[NCERT Textbook]]

 

---

X, Y and Z were partners sharing profits in the ratio of 2 : 2 : 1. The Balance Sheet as at 31st March, 2019, when they dissolved the firm was as follows:

Liabilities	₹	Assets		₹
X's Capital	1,27,500	Other Sundry Assets		1,17,000
Y's Capital	1,10,000	Furniture		11,000
Z's Capital	17,000	Debtors	1,24,200
Loan	11,500	Less: Provision for Doubtful Debts	1,200	1,23,000
Creditors	16,000	Stock		17,800
		Cash		13,200
	2,82,000			2,82,000

 It was agreed that:

1. X to take over furniture at ₹ 8,000 and debtors amounted to ₹ 1,20,000 at ₹ 1,17,200 and the creditors of ₹ 16,000 were to be paid by him at this figure.
2. Y is to take over all stock for ₹ 17,000 and some sundry assets at ₹ 72,000 (being 10% less than the book value).
3. Z to take over remaining sundry assets at 80% of the book value and assume the responsibility of discharge of loan together with accrued interest of ₹ 2,300.
4. The expenses of realisation were ₹ 2,700. The remaining debtors were sold to a debt collecting agency at 50% of the value.

Prepare necessary accounts to close the books of the firm.

 

---

How deficiency of creditors is paid off at the time of dissolution of the firm.

[[NCERT Textbook]]