Dissolution Solution

Solution
DISSOLUTION OF PARTNERSHIP
Class 12 - Accountancy
1. (a)
B's Capital A/c Dr. 1,200
To Realisation A/c 1,200
Explanation: If any unrecorded asset is taken over by the partner (any partner), it should be not be recorded at its actual value,
instead, it should be recorded at the price at which asset is taken over. In this case, B’s Capital Account should be debited and
the realization account should be credited by ₹1,200 and not by ₹1,600.
Entry will be:
2. (c) Transferred to realization account at book value

Explanation: At the time of dissolution of partnership firm, goodwill given in the balance sheet should be transferred to the
debit side of realisation account at its book value and not at the market value as it is a part of fixed assets of the business.
Entry will be:
Realisation A/c ... Dr
To Goodwill A/c
3. (c)
Mohan's Capital A/c Dr. 22,500
Explanation: Calculation of the amount paid to the creditors in full settlement:

Total amount due to the creditors = 30,000
Amount waived by the creditors = 5,000
Amount due after deducting the amount waived by creditors = 30,000 - 5,000 = 25,000
Final Payment made to creditors are = 25,000 - 2500 ( 25000 × 10% Discount ) = 22,500
4. (d) When all partners become insolvent
Explanation: When all partners of the firm become insolvent, in such a case it is compulsory to dissolve the firm. It means this
is the end of the partnership firm and end of the partnership among the partners. There are some other conditions when a firm
gets compulsory dissolve are:
i. Heavy Losses year after year.
ii. By Adjudication of all partners except one partner.
iii. By the happening of any event which makes it unlawful for the business of the firm to be carried on etc.
iv. Death of all partners except one partner.
5. (b) Debit side of Realisation A/c
Explanation: Any unrecorded liability (which is not given in the balance sheet or which was not recorded earlier) will be
shown on the debit side of realization account. It will be paid by the firm at the time of dissolution or might be paid by a
partner.
Entry will be:
Realisation A/c ... Dr.
To Bank A/c
6. (b) Mutual Agreement
Explanation: When all the partners agree to close down the business mutually, hence partners can dissolve the firm without the
interference of the court that is called dissolution by mutual agreement.
1 / 32
cont. 8860705297
7. (a) No Entry is required
Explanation: If an asset is taken over by the external liabilities for the full settlement of their due amount, in such a case no
need to record any journal entry. Because Assets and Liabilities both are transferred already in Realisation A/c. Now no Entry
will be passed.
8. (b) Cash A/c
Explanation: At the time of dissolution of partnership firm, all accounts will be closed and at the end, cash or bank account is
prepared. Both sides of the cash/ banks account will be equal automatically without adding any balancing figure at the end.
There should be no balance in cash A/c.
9. (c) Nil or zero
Explanation: If the realized value of any asset is not given in the question, in such a case, realized value of Asset should be
assumed as nil value or Zero value realized from Assets.
10. (d) Cash A/c
Explanation: If the unrecorded asset is taken over by a partner, it will take place in realization account as well as in concerned
partner’s capital account but not in cash account because partner's Capital A/c will be debited and Realisation A/c will be
credited.
11. (a) - (ii), (b) - (iv), (c) - (iii), (d) - (i)
12. (a) - (i), (b) - (iii), (c) - (ii), (d) - (iv)
13. (a) - (iv), (b) - (iii), (c) - (i), (d) - (ii)
14. (a) - (ii), (b) - (i), (c) - (iv), (d) - (iii)
15. (a) - (ii), (b) - (iii), (c) - (iv), (d) - (i)
16. Partner's Loan on Assets side is actually drawings
So the entry will be,
Particulars Dr. Cr.
Partner's Capital A/c......Dr.
To Partner's Loan A/c
(Being Partner's Loan/drawings transferred to Partner's Capital Account)

17. Dissolution of Partnership means a change in relationship among the partners. Partnership ends but firm continues.
18. There are many reasons for which court orders the dissolution of the partnership, they are as follows:
i. one of the partner become of unsound mind.
ii. A partner has become permanently incapable of performing his duties as partner.
iii. A partner is found guilty of misconduct
iv. When there is a breach of Agreement by partner
v. A Partner transfer his right
vi. That the business of the firm cannot be carried on save at a loss.
19. It is debited because the partner's claim over the firm is decreased by the amount of asset taken over by him, thus his capital
account is decreased.
20. According to section 48 of the partnership act 1932
a. Losses including the deficiencies of Capitals are to be paid-
1. First out of profits
2. Next out of Capitals of the partners
3. Lastly if required, by the partners individually in their profit sharing ratio.
b. The Assets of the firm and the amount contributed by the partners to make up the deficiency of capital shall be applied for –
1. First to pay the debts of the firm to the third parties.
2. Partners Loan
3. Partners capital
21. JOURNAL
Date Particulars L.F. Dr. (₹) Cr. (₹)
(i) L's Capital A/c Dr. 18,000
2 / 32
cont. 8860705297
(Debtors for ₹ 20,000 taken over by L for ₹ 18,000)
(ii) Realisation A/c Dr. 14,250
To Bank A/c
14,250
(Creditors for ₹ 15,000 paid at a discount of 5%)
(iii) Realisation A/c Dr. 1,000
To M's Capital A/c

1,000
(Expenses of dissolution paid by M)
(iv) L's Capital A/c Dr. 4,000
M's Capital A/c Dr. 3,000
To Realisation A/c
7,000
(Loss on realisation distributed between L and M in their profit sharing ratio)
22. JOURNAL
(i) Bank A/c Dr. 2,000
To Realisation A/c
2,000
(Unrecorded typewriter sold for ₹ 2,000)
(ii) Disha's Capital A/c Dr. 49,000
To Realisation A/c
49,000
(Stock of ₹ 70,000 taken by Disha at a discount of 30%)
To Bank A/c
16,200
(Payment made to creditors)
(iv) Realisation A/c Dr. 13,000
To Mohit's Capital A/c

13,000
(Payment of remuneration of ₹ 13,000 for completing the dissolution process)
(v) Bank A/c Dr. 50,000
To Nandan's Loan A/c

50,000
(Payment of Loan by Nandan)
(vi) Bank A/c Dr. 12,000
To Realisation A/c
12,000
(₹ 12,000 recovered from a debtor which was written off as Bad Debts last year)
23. Books of Rashim and Bindiya
Journal
Particulars L.F. Amount ₹ Amount ₹
1) Realisation A/c Dr. 1,00,000
To Bank A/c 1,00,000
(Realisation expenses paid)
2) Realisation A/c Dr. 30,000
To Rashim’s Capital A/c 30,000
(Realisation expenses borne by Rashim)
3) Realisation A/c Dr. 70,000
3 / 32
cont. 8860705297
To Rashim’s Capital A/c 70,000
(Realisation expenses borne by Rashim and remuneration to him for dissolution ₹ 70,000)
24. JOURNAL
Dr. Cr.
Date Particulars L.F.
(₹) (₹)
(i) Bank A/c Dr. 40,000
(Being the amount received from a creditor after adjusting value of building ₹ 1,80,000
against his dues)
(ii) No entry
To Bank A/c 30,000
(Being the amount paid to a creditor being the balance after taking over investments)
(iv) L's Capital A/c Dr. 1,600
M's Capital A/c Dr. 2,400
(Being the loss on realisation debited to Capital Accounts of the partners in their profit-
sharing ratio, i.e., 2: 3)
25. JOURNAL
(i) X's Loan A/c Dr. 40,000
To Realisation A/c
40,000
(X's loan settled by ging in unrecorded asset)
To Bank A/c
8,800
(Balance amount paid to creditor Raman)
To Bank A/c
15,000
(Balance amount paid to creditor Sudhir)
(iv) No Entry
(v) No Entry
26. Particulars ₹ Particulars ₹
To Debtors 60,000 By Creditors 45,000
To Stock A/c 85,000 By Shanti's Capital A/c 30,600
To Furniture A/c 1,00,000 (Stock)(₹ 34,000 - ₹ 3,400)
To Machinery A/c 1,30,000 By Bank A/c (Assets Realised):
To Bank A/c (Payment): Stock (Remaining) 40,000
Outstanding Bill for Repairs 19,000 Furniture 80,000
Creditors 45,000 64,000 Investment 20,000
Machinery 70,000
4 / 32
cont. 8860705297
Debtors 55,000 2,65,000
By Loss transferred to:
Shanti's Capital A/c 78,720
Satya's Capital A/c 19,680 98,400
4,39,000 4,39,000
27. Journal Entries
Date Particulars LF Dr. Cr.
i Alok Capital A/c ........Dr. 7.500
Realisation A/c ........Dr. 2.500
To Bank 10,000
(Being expense on realisation paid.)
ii Realisation A/c ........Dr. 2,000
To Bank 2,000
(Being expense on realisation paid.)
iii Realisation A/c ........Dr. 10,000
To Amit Capital A/c 10,000
(Being expense on realisation paid by partner.)

28. JOURNAL
(i) Realisation A/c Dr. 12,000
To Bank A/c
12,000
(Being Bank loan discharged)
(ii) Realisation A/c Dr. 400
To A's Capital A/c

400
(Being Commission payable to A)
(iii) A's Capital A/c Dr. 16,800
To Deferred Advertisement Expenditure A/c

28,000
(Being Transfer of fictitious asset to partner's Capital Accounts)
(iv) B's Capital A/c Dr. 1,200
To Realisation A/c
1,200
(Being Stock taken over by B)
(v) Bank A/c Dr. 7,000
To Realisation A/c
7,000
(Being Amount realised from unrecorded Computer)
(vi) Realisation A/c Dr. 2,000
To Bank A/c
2,000
(Being Payment of outstanding repairs)
29. According to Section 48 of the Indian Partnership Act, 1932:
The following order has to be followed for the discharge of liabilities:
i. Payment to loans provided by third parties;
5 / 32
cont. 8860705297
ii. Payment to loans and advances provided by the partners;
iii. Payment of capitals of partners;
iv. The residue will be divided among the partner's in the profit-sharing ratio.
According to the above rules, Mrs. A, a third party, has to be paid off before B. Hence, amount paid to Mrs. A = ₹ 20,000; amount
paid to B = ₹ 5,000.
30. JOURNAL
Date Particular L.F. Dr. (₹) Cr. (₹)
(i) Bank A/c Dr. 20,000
(Being the already written off furniture sold)
(ii) Bank A/c Dr. 7,000
(Being the debt already written off recovered)
(iii) A's Capital A/c Dr. 50,000
(Being the unrecorded goodwill taken over by A)
(iv) B's Capital A/c Dr. 3,500
(Being the computer already written off taken over by B)
(v) A's Capital A/c Dr. 7,500
(Being the investments (shares) written off taken over by A and B in their profit-sharing
ratio)
31. Journal Entries
Date Particulars L.F. Dr. Cr.
a Profit and Loss A/c .........Dr. 18,000
To X’s capital A/c 9,000
To Y's capital A/c 6,000
To Z capital A/c 3,000
(Being Profit and Loss distributed.)
b X's capital A/c .........Dr. 50,000
(Being Unrecorded bike taken over by partner.)
c Realisation A/c .........Dr. 4,000
To Bank A/c 4,000
(Being creditors paid.)

32. Books of Romesh and Bhawan
Realisation Account
Dr. Cr.
Particulars Amount ₹ Particulars Amount ₹
6 / 32
cont. 8860705297
Debtors 70,000 Bank loan 60,000
Stock 2,00,000 Creditors 80,000
Investments 1,40,000 Bills payable 40,000
Buildings 60,000 Romesh’s Capital (investment) 8,100
Bank (bills payable) 40,000 Bhawan’s Capital (investment) 1,17,000
Bank (creditors) 63,000 Bank:
Bhawan’s capital (loan with interest) 63,600 Debtors 66,500
Bank (unrecorded liability) 5,000 Stock 2,00,000
Buildings 51,000 3,17,500
Loss transferred to:
Romesh capital 11,400
Bhawan capital 7,600 19,000
6,41,600 6,41,600
Partners Capital Accounts
Dr. Cr.
Date Particulars J.F. Romesh ₹ Bhawan ₹ Date Particulars J.F. Romesh ₹ Bhawan ₹
Realisation (investment) 8,100 1,17,000 Balance b/d 1,00,000 2,00,000
Realisation (loss) 11,400 7,600 Realisation (bank loan) - 63,600
Bank 80,500 1,39,000
1,00,000 2,63,600 1,00,000 2,63,600

Bank Account
Dr. Cr.
Date 2017 Particulars Amount ₹ Date 2017 Particulars Amount ₹
Balance b/d 30,000 Realisation (creditors) 63,000
Realisation (assets realised) 3,17,500 Realisation (unrecorded liability) 5,000
Bhawan loan 20,000
Realisation (bills payable) 40,000
Romesh‘s capital 80,500
Bhawan’s capital 1,39,000
3,47,500 3,47,500
Note: No entry has been made for acceptance of unrecorded investments by a creditor as part of payment of his dues as per rules.
33. BALANCE SHEET
as at 1st April, 2015
Liabilities ₹ Assets ₹
Creditors 23,150 Cash in hand 3,920
Capital Accounts: C's Capital (Dr.) 15,000
A 1,25,000 Sundry Assets (Balancing Figure) 1,74,230
B 45,000 1,70,000
1,93,150 1,93,150
7 / 32
cont. 8860705297
REALISATION ACCOUNT
Dr. Cr.
Particulars ₹ Particulars ₹
To Sundry Assets 1,74,230 By Creditors 23,150
To Cash (Creditors paid) 23,150 By Cash (Assets realised) 1,44,910
To Cash (Expenses) 1,860 By Loss Realisation transferred to:
A's Capital A/c 12,472
B's Capital A/c 9,354
C's Capital A/c 9,354 31,180
1,99,240 1,99,240
34. Realisation Account
To Sundry Assets: By Sundry Liabilities
Debtors 19,000 Creditors 38,000
Stock 6,000 M₹ A's Loan 10,000 48,000
Furniture 4,000 By Bank A/c (Assets Realised)
Plant 28,000 Stock 5,000
Investment 10,000 67,000 Debtors 18,500
To A's Capital A/c (Mrs. A's Loan) Furniture 4,500
To Bank A/c: Plant 25,0000 53,000
Creditors 37,000 By Loss Transferred:
Expenses 1,600 38,600 A 3,960
B 2,640 6,600
1,15,600 1,15,600
Bank Account
To Balance b/d 11,500 By B's Loan A/c 15,000
To Realisation A/c 53,000 By Realisation A/c 38,600
By A's Capital A/c 6,540
By B's Capital A/c 4,360
64,500 64,500
Partner's Capital Accounts
Particulars A (₹) B (₹ ) Particulars A (₹) B (₹)
To P&L A/c 4,500 3,000 By Balance b/d 10,000 8,000
To Realisation A/c 8,000 - By Reserve 3,000 2,000
To Realisation Loss 3,960 2,640 By Realisation A/c 10,000 -
To Bank A/c 6,540 4,360
23,000 10,000 23,000 10,000

8 / 32
cont. 8860705297
To Sundry Assets By Creditors 50,400
Buildings 23,500 By A (investments) 18,000
Furniture 6,500 By Cash A/c (Assets Realised)
Stock 20,100 Fixed Assets 29,700
Debtors 62,600 Stock and Debtors 80,000 1,09,700
Investments 16,000 1,28,700 By Capital A/cs Losses
To Cash A/c- A 1,000
Creditors = (50,400 - 800) = 49,600 B 1,000
Bills dishonoured 1,500 C 1,000 3,000
Expenses 1,300 52,400
1,81,100 1,81,100
Cash Account
To Balance b/d 3,700 By Realisation A/c 52,400
To Realisation A/c 1,09,700 By Capital A/c A 25,000
To A's Loan A/c 10,000 B 28,000
C 18,000 71,000
1,23,400 1,23,400
Partner's Capital Accounts
Particulars A (₹) B (₹) C (₹) Particulars A (₹) B (₹) C (₹)
To Real. A/c 18,000 - - By Balance b/d 40,000 25,000 15,000
To Real. Loss 1,000 1,000 1,000 By Reserves 4,000 4,000 4,000
To Cash A/c 25,000 28,000 18,000
44,000 29,000 19,000 44,000 29,000 19,000

36. REALISATION ACCOUNT
Dr. Cr.
Particular ₹ Particular ₹
To Sundry Assets: By Provision for Doubtful Debts 5,000
Sundry Debtors 65,000 By Sundry Liabilities:
Goodwill 50,000 Sundry Creditors 50,000
Furniture 1,00,000 Employees Provident Fund 5,000
Building 3,80,000 5,95,000 Bank Loan 55,000 1,10,000
To Susan's Capital A/c (Realisation Exp.) 2,000 By Furniture 97,000
To Bank: By Geeta's Capital (Goodwill) 40,000
Sundry Creditors 50,000 By Rashi's Capital (Building) 3,00,000
Employee's Provident By Bank:
Fund 5,000 Sundry Debtors 52,000
Bank Loan 60,000 1,15,000 By Loss on Realisation transferred to:
9 / 32
cont. 8860705297
Susan's Capital A/c 54,000
Geeta's Capital A/c 32,400
Rashi's Capital A/c 21,600 1,08,000
7,12,000 7,12,000
37. Dr Realisation Account Cr.
Particulars Amt (Rs.) Particulars Amt (Rs.)
To Sundry Assets A/c By Sundry Liabilities A/c
Building 1,20,000 Creditors 80,000
Investments 30,600 Mrs Prashant's Loan 40,000
Debtors 34,000 Investment Fluctuation Fund 8,000 1,28,000
Bills Receivable 37,400 By Provision for Doubtful Debts 4,000
Goodwill 4,000 2,26,000 By Cash A/c (Assets realised)
To Prashant's Capital A/c Debtors 24,000
Commission 1,000 Building 1,52,000
Mrs Prashant's Loan 40,000 41,000 Bills Receivable (37 ,400-1 ,400) 36,000 2,12,000
To Cash A/c (Liabilities paid) By Rajesh's Capital A/c (Investments) 27,000
Realisation Expenses 2,500
Creditors (80 ,000-8 ,000) 72,000 74,500
To Profit Transferred to
Prashant's Capital A/c 17,700
Rajesh's Capital A/c 11,800 29,500
3,71,000 3,71,000
Dr Partners' Capital Account Cr
Prashant Rajesh Prashant Rajesh

Particulars Particular
(Rs.) (Rs.) (Rs.) (Rs.)
To Profit and Loss A/c 4,800 3,200 By Balance b/d 42,000 42,000
To Realisation A/c By Realisation A/c (Mrs. Prashant's loan +

--- 27,000 41,000 ---
(Investment) Commission)
To Cash A/c (Final

95,900 23,600 By Realisation A/c (Profit) 17,700 11,800
Payment)
1,00,700 53,800 1,00,700 53,800
Dr. Cash Account Cr
By Realisation A/c (Liabilities paid)

To Balance b/d 6,000 74,500
(2,500+ 72,000)
To Realisation A/c (Assets realised)

2,12,000 By Rajesh's Loan A/c 24,000
(24,000+ 1,52,000 + 36,000)
By Prashant's Capital A/c (Final payment) 95,900
By Rajesh's Capital A/c (Final Payment) 23,600
10 / 32
cont. 8860705297
2,18,000 2,18,000
Values being conveyed are (Any one) :-
i. Social Responsibility : By ordering dissolution of business, which was dumping hazardous material into the river, the court
has shown social responsibility towards society
ii. Environment Protection : The court has taken measures towards environment protection by ordering dissolution of business,
which was causing water pollution
iii. Law Enforcement : The court has worked towards law enforcement by ordering the closure of business which is harmful for
society and the environment.
Note : Profit on realisation is transferred to Partner's Capital A/c in the ratio 3:2.
Partner's Loan is not outsider's liability so not transferred to Realisation A/c. At the time of settlement partner's loan is paid after
payment of outsider's liability but before payment of capital. Following Entry is passed on payment of partner's loan :
Partner's Loan A/c Dr.
To Bank/ Cash A/c
If question is silent about the realisation of a particular asset, then its realised value is taken as nil. Therefore, realised value of
goodwill is taken as nil.
If Reserve is made regarding particular asset so if that asset is transferred to realisation, then that reserve should also be
transferred to the Realisation A/c
38. JOURNAL
Dr. Cr.
(₹) (₹)
(i) Bank A/c (76,000 - 12,000) Dr. 64,000
Realisation A/c
64,000
(Debtors realised)
(ii) Realisation A/c (7,000 - 350) Dr. 6,650
To Parul's Capital A/c

6,650
(Husband's loan taken over by Parul at a discount of 5%)
(iii) Payal's Capital A/c Dr. 3,000
To Realisation A/c
3,000
(Unrecorded machine taken over by Payal)
(iv) Realisation A/c Dr. 4,000
To Bank A/c
4,000
(Payment of contingent liability)
(v) Parul's Capital A/c Dr. 9,000
Payal's Capital A/c Dr. 9,000
Priyanka's Capital A/c Dr. 9,000
To Profit and Loss A/c

27,000
(Transfer of debit balance of profit and loss account)
To Priyanka's Capital A/c

(Realisation expenses of ₹ 15,000 paid by Priyanka now reimbursed and Remuneration allowed to 33,000
Priyanka ₹ 18,000 also credited to her account)
Dr. Cr.
Amount Amount
Particulars Particulars
₹ ₹
Sundry Assets 83,000 Sundry Liabilities (WN) 28,000
11 / 32
cont. 8860705297
Cash A/c Assets realised 80,000
Cash A/c: Loss transferred to:
Sundry Liabilities 28,000 A’/s c Capital 5,500
Contingent Liabilities 8,000 36,000 B Capital 2,750
C’s Capital A/c 2,750 11,000
1,19,000 1,19,000
Partners’ Capital Accounts
Dr. Cr.
Particulars A B C Particulars A B C
Realisation A/c Loss 5,500 2,750 2,750 Balance b/d 20,000 20,000 20,000
Bank A/c 14,500 17,250 17,250
20,000 20,000 20,000 20,000 20,000 20,000

Cash Account
Dr. Cr.
Amount Amount
₹ ₹
Balance b/d 5,000 Realisation A/c 36,000
Realisation A/c 80,000 A’s Capital A/c 14,500
B’s Capital A/c 17,250
C’s Capital A/c 17,250
85,000 85,000
Working Notes:
Memorandum Balance Sheet
Dr. Cr.
Amount Amount
Liabilities Assets
₹ ₹
Capital A/cs: Cash in Hand 5,000
A 20,000 Sundry Assets 83,000
B 20,000
C 20,000 60,000
Sundry Liabilities (Balancing figure) 88,000 88,000

40. JOURNAL
To P's Capital A/c

8,000
(Unrecorded liability of ₹ 10,000 taken over by P at a discount of 20%)
(ii) Bank A/c Dr. 5,000
To Realisation A/c
5,000
(Cash received from unrecorded creditor)
(iii) No Entry
12 / 32
cont. 8860705297
(iv) No Entry
(v) Realisation A/c Dr. 20,000
To Bank A/c
20,000
(Payment made to unrecorded creditor)
(vi) P's Loan A/c Dr. 50,000
To Bank A/c
15,000
(P's loan settled by giving unrecorded asset of ₹ 35,000 and the balance in Cash)
41. Dr. Cr.
To Other Sundry Assets 1,17,000 By Provision for Doubtful Debts 1,200
To Furniture 11,000 By Loan 11,500
To Debtors 1,24,200 By Creditors 16,000
To Stock 17,800 By X's Capital A/c:
To X's Capital A/c-Creditors 16,000 Furniture 8,000
To Z's Capital A/c-Loan with Interest 13,800 Debtors 1,17,200 1,25,200
To Cash A/c-Expenses 2,700 By Y's Capital A/c:
Stock 17,000
Sundry Assets 72,000 89,000
By Z's Capital A/c:
Sundry Assets 29,600
[80/100 of (₹1,17,000 - ₹ 80,000)]
By Cash A/c-Debtors 2,100
[50/100 of (₹1,24,200 - ₹ 1,20,000)]
X's Capital A/c 11,160
Y's Capital A/c 11,160
Z's Capital A/c 5,580 27,900
3,02,500 3,02,500
PARTNERS' CAPITAL ACCOUNTS
Dr. Cr.
X Y Z X Y Z
₹ ₹ ₹ ₹ ₹ ₹
To Realisation A/c 1,25,200 89,000 29,600 By Balance b/d 1,27,500 1,10,000 17,000
To Realisation A/c (Loss) 11,160 11,160 5,580 By Realisation A/c 16,000 - 13,800
To Cash A/c 7,140 9,840 - By Cash A/c 4,380
(Balancing Figure) (Balancing Figure)
1,43,500 1,10,000 35,180 1,43,500 1,10,000 35,180

CASH ACCOUNT
13 / 32
cont. 8860705297
Dr. Cr.
To Balance b/d 13,200 By Realisation A/c- Expenses 2,700
By X's Capital A/c-Final

To Realisation A/c-Debtors 2,100 7,140
Payment
To Z's Capital A/c-Cash By V's Capital A/c-Final

4,380 9,840
brought in Payment
19,680 19,680
42. Books of Anju, Manju and Sanju
Realisation Account
Dr. Cr.
Stock 83,000 Provision for doubtful debts 12,000
Furniture 12,000 Creditors 60,000
Debtors 2,42,000 Loan 15,000
Debtors 2,00,000 Anju’s capital:
Anju capital (creditors) 60,000 Furniture 10,000
Sanju capital (loan) 15,000 Debtors 1,85,000 1,95,000
Bank (realisation expenses) 2,200 Manju’s capital:
Stock 83,000
Buildings 1,80,000 2,63,000
Sanju’s capital: (remaining debtors less 20% of book value) 33,600
Loss transferred to:
Anju’s capital 21,360
Manju’s capital 7,120
Sanju’s capital 7,120 35,600
6,14,200 6,14,200
Partners Capital Accounts
Dr. Cr.
Manju Manju
Date Particulars J.F. Anju ₹ Sanju ₹ Date Particulars J.F. Anju ₹ Sanju ₹
₹ ₹
Realisation
1,95,000 2,63,000 33,600 Balance b/d 2,75,000 1,10,000 1,10,000
(assets)
Realisation
Realisation (loss) 21,360 7,120 7,120 60,000 - -
(creditors)
Bank 1,18,640 - 74,280 Realisation - - 15,000
Manju loan (loan) - 20,000
Bank - 1,40,120 -
3,35,000 2,70,120 1,15,000 3,35,000 2,70,120 1,15,000

Alternatively, Manju's loan may be first paid through bank account then the amount payable by Manju on account of debit balance
in her capital account. ₹1,60,120 can be corrected form her.
14 / 32
cont. 8860705297
Bank Account
Dr. Cr.
Date 2017 Particulars Amount ₹ Date 2017 Particulars Amount ₹
Balance b/d 55,000 Realisation (expenses) 2,200
Manju’s capital 1,40,120 Anju’s capital 1,18,640
Sanju’s capital 74,280
1,95,120 1,95,120
Dr. Cr.
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) (Bal. Fig)(3) 93,200
Bills Receivable 8,000 By Kiran’s Capital A/c (Bills Receivable) 7,000
Machinery 60,000 By Bank (Unrecorded Asset)(7) 1,200
Goodwill 6,000 1,39,200 By Bank (Goodwill)(8) 5,000
To Kiran’s Capital A/c: By Realisation Loss transferred to:(2)
Bills Payable 10,000 Prakash’s Capital A/c 19,200
Realisation Expenses 2,100 12,100 Kiran’s Capital A/c 12,800
Wife's Loan 5,000 Rishab's Capital A/c 6,400 38,400
Contingent liability for bill discounted 8,000 13,000
To Bank (Creditors) (Balancing Fig.) 22,500
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 Balance b/d 75,000 50,000
By Realisation A/c (B/P and

To P & L A/c 9,900 6,600 3,300 12,100
Realisation exp.)(4)
To Realisation A/c (Bills By Realisation A/c (Wife Loan &

7,000 13,000
Receivable)(7) contingent liability)(5)
To Realisation A/c (Loss)(2) 19,200 12,800 6,400 By Bank A/c (Amount brought in)(6) 15,700
To Bank A/c (Final Payment)

58,900 35,700
(8)
88,000 62,100 15,700 88,000 62,100 15,700

BANK ACCOUNTS
Dr. Cr.
15 / 32
cont. 8860705297
To Bal. b/d (Bal. Figure) 2,000 By Realisation A/c (Creditors)(1) 22,500
To Realisation A/c (Assets Realised)(3) 93,200 By Prakash's Capital A/c 58,900
To Realisation A/c (Unrecorded Assets)(7) 1,200 By Kirna's Capital A/c 35,700
To Realisation A/c (Goodwill realised)(8) 5,000
To Rishab's Capital A/c(6) 15,700
1,17,100 1,17,100
44. BALANCE SHEET
as at 31st April, 2018
X's Capital: Sundry Assets (Balancing figure) 1,75,000
Opening 1,00,000
Less: Drawings 15,000 85,000
Y's Capital:
Opening 80,000
Z's Capital:
Opening 40,000
1,75,000 1,75,000
REALISATION ACCOUNT
Dr. Cr.
To Sundry Assets 1,75,000 By X's Capital A/c (Stock) 25,000
By Y's Capital A/c (Furniture) 5,000
By Z's Capital A/c (Debtors) 18,500
By Bank A/c(1) 14,000
X's Capital A/c 56,250
Y's Capital A/c 37,500
Z's Capital A/c 18,750 1,12,500
1,75,000 1,75,000
CAPITAL ACCOUNTS
Dr. Cr.
₹ ₹ ₹ ₹ ₹ ₹
To Realisation A/c (Assets taken) 25,000 5,000 18,500 By Balance b/d 85,000 65,000 25,000
To Realisation A/c (Loss) 56,250 37,500 18,750 By Bank (Deficit brought in) - - 12,250
16 / 32
cont. 8860705297
To Bank A/c 3,750 22,500 -
85,000 65,000 37,250 85,000 65,000 37,250

Note :
1. Creditors must have been paid off out of the cash realised on sale of assets. Hence, ₹ 14,000 is the net amount realised on the
sale of assets. Entry will be:
Bank A/c Dr. 14,000

Dr. Cr.
To Debtors 55,000 By Sundry Creditors A/c 31,000
To Stock 81,000 By A's Wife Loan 12,000
To Furniture 20,000 By Bank Loan at 12% 20,000
To Plant 53,700 By Bank (Assets realised) 1,12,500
By Bank A/c (Recovery from B/R

To Bank (payment for bill discounted) 5,000 3,000
dishonoured)
To Bank (payment to Creditors 31,000 Less:

23,000 By Loss transferred to:
8,000)
To Bank (payment of Bank Loan) 21,800 A's Current A/c 27,000
B's Current A/c 27,000
C's Current A/c 27,000 81,000
2,59,500 2,59,500
CURRENT ACCOUNTS
Dr. Cr.
₹ ₹ ₹ ₹ ₹ ₹
To Bal. b/d 22,000 By Balance b/d 10,000 5,000
To Realisation A/c (Loss) 27,000 27,000 27,000 By Reserve for contingency 6,000 6,000 6,000
By P & L A/c 4,000 4,000 4,000
By Capital A/c (transfer) 7,000 12,000 39,000
27,000 27,000 49,000 27,000 27,000 49,000

CAPITAL ACCOUNTS
Dr. Cr.
₹ ₹ ₹ ₹ ₹ ₹
To Current A/c (Transfer) 7,000 12,000 39,000 By Balance b/d 60,000 50,000 20,000
To Bank A/c (Final payment) 53,000 38,000 - By Bank A/c (Deficit brought in) - - 19,000
60,000 50,000 39,000 60,000 50,000 39,000

BANK ACCOUNT
Dr. Cr.
17 / 32
cont. 8860705297
To Balance b/d 6,300 By Realisation A/c (Bill discounted) 5,000
To Realisation A/c (Assets realised) 1,12,500 By Realisation A/c (Creditors) 23,000
To Realisation A/c (Recovery from B/R dishonoured) 3,000 By Realisation A/c (Bank Loan) 21,800
To C's Capital A/c 19,000 By A's Capital A/c 53,000
1,40,800 1,40,800
Notes :
i. The firm has to pay ₹ 5,000 to the bank for the dishonour of the discounted bill, of which 60% i.e. ₹ 3,000 has been received
from R. Following entries will be passed for it:
(i) Bank A/c Dr. 3,000
To Bank A/c 3,000

ii. No separate entry will be passed for the Investments of ₹ 8,000, as these are taken over by the Creditors. Creditors will be
paid at the net figure of ₹ 31,000 - ₹ 8,000 = ₹ 23,000.
iii. Wife’s Loan has not been paid in Cash. It has been settled by giving away furniture. Therefore, no entry will be passed for the
discharge of the Wife’s Loan.
iv. When partner’s Current Accounts are given in the question, it means that the capitals are fixed. In such a case profit or loss on
realisation, accumulated profits and reserves should be transferred to Current Accounts.
46. Dr Realisation Account Cr
Amt Amt
Particular Particular
(Rs.) (Rs.)
Stock 50,000 Shivika's Sisters Loan 20,000 1,00,000
By Parth's Capital A/c (50%

Furniture 2,20,000 2,97,000 88,000
furniture)
To Bank A/c By Bank A/c (Assets realised)
Creditors 80,000 Furniture (50%) 1,05,000
Shivika's Sisters Loan with Interest (20,000 +

22,000 Debtors 26,000 1,31,000
2,000)
Expense 5,000 1,07,000 By Shivika's Capital A/c (Stock) 29,000
By Loss Transferred to Capital A/c
Parth 33,600
Shivika 22,400 56,000
4,04,000 4,04,000
Dr Partners' Capital Account Cr
Shivika
Particulars Parth (Rs.) Particulars Parth (Rs.) Shivika (Rs.)
(Rs.)
To Realisation A/c
88,000 ---- By Balance c/d 1,75,0001 1,94,000
(Furniture)
18 / 32
cont. 8860705297
To Realisation A/c ---- 29,000
(Stock)
To Realisation A/c
33,600 22,400
(Loss)
To Bank A/c (Final

53,400 1,42,600
Payment)
1,75,000 1,94,000 1,75,000 1,94,000
Dr Bank Account Cr
Particular Amt (Rs.) Particular Amt (Rs.)
To Balance b/d 1,72,000 By Realisation A/c (Creditors) 80,000
To Realisation A/c By Realisation A/c (Shivika's sister Loan) 22,000
Furniture 1,05,000 By Realisation A/c (Expenses) 5,000
Debtors 26,000 1,31,000 By Parth's Capital A/c (Final Payment) 53,400
By Shivika's Capital A/c (Final Payment) 1,42,600
3,03,000 3,03,000
working note 1 :
Loss on Realisation=56,000
Loss on Realisation transferred to parth's capital account =56,000 × 3/5 = 33,600
Loss on Realisation transferred to Shivika's capital account = 56,000 × 2/5 =22,400
Working note 2 :
Shivika's sister loan + interest on that loan
20,000+ 2,000 = 22,000
Working note 3:
Furniture took by Parth 50% of Furniture @20% less than the book value
= 50% of total Furniture = 50% of 2,20,000=1,10,000
He took Furniture of 1,10,000 @ 20% less than the book value = 88,000
Dr. Cr.
To Fixed Assets A/c 50,000 By Creditors A/c 40,000
To Stock A/c 60,000 By Bills Payable A/c(1) 10,000
To Debtors A/c 30,000 By Mrs. A's Loan A/c(1) 16,000
To Furniture A/c 20,000 By Provision for Bad Debts A/c 2,000
To Goodwill A/c 18,000 By Bank A/c
To Bank A/c (Expenses of Realisation) 3,000 Fixes Assets 32,000
To Bank A/c Stock 55,000
Creditors 38,000 Debtors 25,000 1,12,000
Bills Payable 10,000 By A's Capital A/c (Furniture taken over) 16,000
Mrs. A's Loan 16,000 64,000 By Loss on Realisation:
To Bank A/c (Claim against the firm) 6,400 A's Capital A/c 2/4 27,700
B's Capital A/c 1/4 13,850
C's Capital A/c 1/4 13,850 55,400
19 / 32
cont. 8860705297
2,51,400 2,51,400
A's LOAN ACCOUNT
Dr. Cr.
To Bank A/c 20,000 By Balance b/d 20,000
20,000 20,000
CAPITAL ACCOUNT
Dr. Cr.
₹ ₹ ₹ ₹ ₹ ₹
To Realisation A/c (Furniture taken over

16,000 By Balance b/d 40,000 20,000 20,000
by A)
By Workmen Compensation
To Realisation A/c (Loss) 27,700 13,850 13,850 10,000 5,000 5,000
Reserve
To Bank A/c (Final Payment) 6,300 11,150 11,150
50,000 25,000 25,000 50,000 25,000 25,000

BANK ACCOUNT
Dr. Cr.
To Balance b/d 10,000 By Realisation A/c (Expenses of Realisation) 3,000
To Realisation A/c (Assets Realised) 1,12,000 By Realisation A/c (Liabilities Paid off) 64,000
By Realisation A/c (Claims against the firm) 6,400
By A's Loan A/c 20,000
By A's Capital A/c 6,300
By C's Capital A/c 11,150
1,22,000 1,22,000
Notes:
1. Nothing is mentioned in the question about the payment of Bills Payable and Mrs. A's Loan. It will be assumed that these will
be paid in full.
2. Goodwill appears in the Balance Sheet. It will be treated like any other asset and is transferred to the debit of Realisation A/c.
Dr. Cr.
To Plant 50,000 By Provision for Doubtful Debts 1,500
To Freehold Property 1,12,000 By Sundry Creditors 24,500
To Patents 6,000 By Mrs. C's Loan 20,000
To Stock 40,000 By A's Capital A/c:
To Sundry Debtors 40,000 Plant 40,000
To Prepaid Expenses 2,000 Freehold Property 1,50,000
20 / 32
cont. 8860705297
To Bank (Mrs. C's Loan) 20,000 Goodwill 10,000
To Bank (Expenses) 1,000 Patents 6,000
To Profit on realisation: Sundry Debtors 35,000
A's Capital A/c 1/2 15,000 Stock 36,000
B's Capital A/c 10,000 2,77,000
C's Capital A/c 5,000 30,000 Less: Creditors 22,000 2,55,000
3,01,000 3,01,000
CAPITAL ACCOUNTS
Dr. Cr.
₹ ₹ ₹ ₹ ₹ ₹
To Realisation (Loss) 2,55,000 By Balance b/d 1,00,000 80,000 40,000
To Bank 94,000 47,000 By Workmen Compensation Reserve 6,000 4,000 2,000
By Realisation (Profit) 15,000 10,000 5,000
By Bank 1,34,000
2,55,000 94,000 47,000 2,55,000 94,000 47,000

BANK ACCOUNT
Dr. Cr.
To Balance b/d 28,000 By Mrs. C's Loan 20,000
To A's Capital A/c 1,34,000 By Realisation (Expenses) 1,000
By C's Capital A/c 47,000
1,62,000 1,62,000
BALANCE SHEET OF A
as at 31st March, 2018
Sundry Creditors 22,000 Goodwill 10,000
Capital 2,55,000 Freehold Property 1,50,000
Plant 40,000
Patents 6,000
Stock 36,000
Sundry Debtors 40,000
Less: Provision 5,000 35,000
2,77,000 2,77,000
Amount Amount
49. (₹) (₹)
Stock 40,000 Bank Loan 35,000
21 / 32
cont. 8860705297
Investments 20,000 Provident Fund 15,000
Plant 50,000 Commission Received in Advance 8,000
Cash A/c: Investments Fluctuation Fund 10,000
Commission Received in Advance 5,000 Cash A/c:
Outstanding Salary 8,500 Debtors 60,000
Compensation paid to Employees 17,000 Stock 35,500
Provident Fund 20,000 Investments 16,000
Creditors 50,000 Plant 45,000 1,56,500
Bank Loan 35,000 1,35,500 Loss transferred to:
Anuj’s Capital A/c 7,825 Anju's Capital A/c 21,530
Manju's Capital A/c 21,530
Sanju's Capital A/c 10,765 53,825
3,28,325 3,28,325
Dr. Cr.
Particulars Anju Manju Sanju Particulars Anju Manju Sanju
Profit and Loss A/c 1,200 1,200 600 Balance b/d 50,000 50,000 30,000
Realisation A/c 21,530 21,530 10,765 Realisation A/c 7,825 – –
Cash A/c 35,095 27,270 18,635
57,825 50,000 30,000 57,825 50,000 30,000

Cash Account
Dr. Cr.
Amount Amount
(₹) (₹)
Balance b/d 60,000 Realisation A/c 1,35,500
Realisation A/c 1,56,500 Anju’s Capital A/c 35,095
Manju’s Capital A/c 27,270
Sanju’s Capital A/c 18,635
2,16,500 2,16,500
Working Notes:
WN 1
Anju's Commission = Assets Realised × 5
100
= 1,56,000 × 5
100
= ₹ 7,825
WN 2
Realisation of plant = 50,000 × 90
100
= ₹ 45,000
50. JOURNAL
Dr. Cr.
(₹) (₹)
To Bank A/c
5,000
(Payment of realisation expenses)
22 / 32
cont. 8860705297
To X's Capital A/c

8,000
(Realisation expenses paid by X on behalf of the firm)
(iii) Partner's Capital A/c Dr. 10,000
To Bank A/c
10,000
(Realisation expenses paid by the firm on behalf of the partner)
(iv) X's Capital A/c Dr. 15,000
To Bank A/c
15,000
(Realisation expenses paid by the firm on behalf of the partner)
(v) Realisation A/c Dr. 8,000
Maruti's Capital A/c Dr. 12,000
To Bank A/c
(Realisation expenses paid by the firm. Firm's share of expenses debited to Realisation 20,000
Account and balance to Partner's Capital Account)
To Maruti's Capital A/c

8,000
(Realisation expenses paid by the partner on behalf of the firm)
(vii) Realisation A/c Dr. 10,000
Sudhir's Capital A/c 6,000
To Bank A/c
16,000
(Remuneration allowed to the partner and excess expenses charged from him)
(viii) Realisation A/c Dr. 15,000
To Ravi's Capital A/c 10,000
To Bank A/c
5,000
(Remuneration allowed to Ravi and expenses paid by the firm on his behalf)
(ix) Realisation A/c* Dr. 27,500
To Anil's Capital A/c 20,000
To Bank A/c
7,500
(Remuneration allowed and expenses paid)
(x) Realisation A/c* Dr. 34,000
To Sunil's Capital A/c (Remuneration allowed and expenses paid by him) 34,000
(xi) No Entry
*In Case (ix) and (x) partner is not liable to bear the expenses of realisation.
Amt Amt
Date Particular LF
51. (Dr.) (Cr.)
2015
April
1
(i) Bank A/c Dr. 1,40,000
To Realisation A/c 1,40,000
(Being payment received from creditors)
(ii) No Entry
23 / 32
cont. 8860705297
*While dissolving the firm, when we realise an asset, realisation a/c has to be credited and
while realising a liability realisation a/c has to be debited. In this case, we are realising one
asset as against one liability. Hence, no entry is required. The difference in the amount is to
be ignored
To Bank A/c 45,000
(Being partial payment made to creditors through cheque)
when we realise an asset, realisation a/c has to be credited and while realising a liability
realisation a/c has to be debited. A partial claim of a creditor is settled by transferring
investment to him. In this case, we are realising one asset as against one liability. Hence,
no entry is required to this extent.
(v) Lal's Capital A/c (15,000 × 3 /10) Dr. 4,500
Pal's Capital A/c (15,000 × 7 /10) Dr. 10,500
(Being loss on realisation transferred to partners' capital account in the ratio 3:7)
Particulars Amount Particulars Amount
Land and Building 57,000 Creditors 40,000
Stock 50,000 Land and building 40,000
Sundry Debtors 50,000 Stock 30,000
Bank A/c: Sundry Debtors 42,000 1,12,000
Creditors 40,000 + 15,000 55,000 Loss transferred to:
Expense 1200 56,200 A’s Capital A/c 30,600
B’s Capital A/c 20,400
C’s Capital A/c 10,200 61,200
2,13,200 2,13,200
Profit and Loss A/c 7,500 5,000 2,500 Balance b/d 60,000 40,000 10,000
Workmen
Advertisement
3,000 2,000 1,000 Compensation Reserve 10,500 7,000 3,500
Suspense A/c
A/c
Realisation A/c Loss 30,600 20,400 10,200 Bank A/c - - 200
Bank A/c 29,400 19,600 -
70,500 47,000 13,700 70,500 47,000 13,700

A’s Loan Account
Bank A/c 10,000 Balance b/d 10,000
10,000 10,000
Bank Account
Dr. Cr.
24 / 32
cont. 8860705297
Balance b/d 3,000 A’s Loan A/c 10,000
Realisation A/c 56,200
Realisation A/c 1,12,000 A’s Capital A/c 29,400
C’s Capital A/c 200 B’s Capital A/c 19,600
1,15,200 1,15,200
Dr. Cr.
To Land and Buildings A/c 57,000 By Creditors A/c 40,000
To Stock A/c 50,000 By Bank (Assets Realised):
To Sundry Debtors A/c 50,000 Land & Buildings 40,000
To Bank (Payment of Liabilities) 20,000 Stock 30,000
To Bank A/c (Creditors) 35,000(1) Sundry Debtors 42,000 1,12,000
To Bank A/c (Expenses of dissolution) 1,200 By Loss on realisation:
A's Capital A/c 3/6 30,600
B's Capital A/c 2/6 20,400
C's Capital A/c 1/6 10,200 61,200
2,13,200 2,13,200
LOAN FROM A ACCOUNT
Dr. Cr.
To Bank A/c 10,000 By Balance b/d 10,000
10,000 10,000
CAPITAL ACCOUNT
Dr. Cr.
₹ ₹ ₹ ₹ ₹ ₹
To Realisation A/c (Loss) 30,600 20,400 10,200 By Balance b/d 60,000 40,000 10,000
To Bank A/c (Final Payment) 29,400 19,600 By Bank A/c (Amount brought in) 200
60,000 40,000 10,200 60,000 40,000 10,200

BANK ACCOUNT
Dr. Cr.
To Balance b/d 3,000 By Receivable A/c (Payment of Liabilities) 20,000
To Receivable A/c (Assets realised) 1,12,000 By Receivable A/c (Creditors) 35,000
To C's Capital A/c 200 By Receivable A/c (Expenses of dissolution) 1,200
By Loan from A A/c 10,000
By A's Captial A/c 29,400
25 / 32
cont. 8860705297
By B's Captial A/c 19,600
1,15,200 1,15,200
Note (1): Liability for damages ₹ 5,000 is already included in the Creditors appearing in the Balance Sheet. As such, Creditors
will be paid ₹ 35,000 net.
Dr. Cr.
To Stock in Trade 5,000 By Provision for Doubtful Debts 2,000
To Investments 10,000 By Sundry Creditors 30,000
To Debtors 20,000 By Bills Payable 8,000
To Plant 20,000 By Mrs. A's Loan 5,000
To Building 15,000 By Mrs. B's Loan 10,000
To Goodwill 4,000 By Investment Fluctuation Reserve 1,000
To A's Capital (Mrs. A's loan) 5,000 By A's Capital (Stock in trade) 4,000
To Bank (Sundry Creditors) (Note

29,850 By B's Capital (half of investments at 10% discount) 4,500
1)
To Bank (Bills Payable) (Note 1) 7,960 By Bank:
To Bank (Mrs. B's Loan) 10,000 Debtors 19,000
A's Capital A/c 16,245 Plant 25,000
B's Capital A/c 16,245 32,490 Building 40,000
Goodwill 6,000
Investments 4,500 94,500
By B's Capital (unrecorded asset) 300
1,59,300 1,59,300
CAPITAL ACCOUNTS
Dr. Cr.
Particulars A B Particulars A B
₹ ₹ ₹ ₹
To Advertisement Suspense A/c 1,750 1,750 By Balance b/d 10,000 10,000
To Realisation (Stock in trade) 4,000 By General Reserve 5,000 5,000
To Realisation (Investments) 4,500 By Realisation (Mrs. A's Loan) 5,000
To Realisation (Unrecorded asset) 300 By Realisation (Profit) 16,245 16,245
To Bank 30,495 24,695
36,245 31,245 36,245 31,245

BANK ACCOUNT
Dr. Cr.
To Balance b/d 8,000 By Realisation A/c (Sundry Creditors) 29,850
To Cash (Cash balance deposited into bank) 500 By Realisation A/c (Bills Payable) 7,960
To Realisation: By Realisation (Mrs. B's Loan) 10,000
26 / 32
cont. 8860705297
Debtors 19,000 By A's Capital A/c 30,495
Plant 25,000 By B's Capital A/c 24,695
Building 40,000
Goodwill 6,000
Investments 4,500 94,500
1,03,000 1,03,000
Note (1) Calculation of discount on Creditors and Bills Payable:
Creditors = 30,000 × × 1
12
= ₹ 150
100
6
Bills Payabl = 8,000 × 1
12
×
100
6
= ₹ 40
Dr. Cr.
Amount Amount
(₹) (₹)
Stock 75,000 Provision for Doubtful Debts 6,000
Book Debts 66,000 Sundry Creditors 75,000
Plant and Machinery 45,000 Bills Payable 30,000
Land and building 48,000
Bank A/c: Rita’s Capital A/c
Goodwill taken over 30,000
Rita’s Loan A/c
Stock taken over 15,000
Sundry Creditors 67,500
Bills Payable 30,000 Bank A/c:
Expenses 5250 1,02,750 Book Debts 54,000
Profit transferred to: Stock 73,125
Rita's Capital A/c 70,688 Plant and machinery 75,000
Sobha’s Capital A/c 70,687 1,41,375 Land and Building 1,20,000 3,22,125
4,78,125 4,78,125
Dr. Cr.
Rita Sobha Rita Sobha

(₹) (₹) (₹) (₹)
Realisation A/c Assets 30,000 – Balance b/d 90,000 30,000
Reserve Fund 12,000 12,000
Bank A/c 1,42,688 1,12,687 Realisation A/c Profit 70,688 70,687
1,72,688 1,12,687 1,72,688 1,12,687

Rita's Loan A/c
Dr. Cr.
Amount Amount
(₹) (₹)
27 / 32
cont. 8860705297
To Realisation A/c 15,000 Balance b/d 15,000
15,000 15,000
Bank Account
Dr. Cr.
Balance b/d 30,000 Realisation A/c 1,02,750
Cash A/c 6,000 Rita’s Capital A/c 1,42,688
Realisation A/c 3,22,125 Sobha’s Capital A/c 1,12,687
3,58,125 3,58,125
Dr. Cr.
To Sundry Assets—Transfer: By Creditors 50,000
Debtors 30,000 By Bills Payable 10,000
Stock 20,000 By R's Loan 12,000 22,000
Furniture 15,000 By Bank A/c-Assets Realised:
Land and Building 2,45,000 3,10,000 Debtors 28,000
To Bank A/c-Liabilities Paid: Land and Building 2,80,000
R's Loan 12,000 Unrecorded Asset 1,00,000
Creditors 45,000 Furniture 12,000 4,20,000
Bills Payable 9,000 66,000 By T's Capital A/c-Stock 15,000
To Gain (Profit) on Realisation tried to:
D's Capital A/c 43,667
Fs Capital A/c 43,667
G's Capital A/c 43,666 1,31,000
5,07,000 5,07,000
PARTNERS' CAPITAL ACCOUNTS
Dr. Cr.
Particulars D(₹) T(₹) G(₹) Particulars D(₹) T(₹) G(₹)
To Balance b/d - - 20,000 By Balance b/d 1,00,000 1,50,000 -
To Realisation A/c - 15,000 - By Realisation A/c 43,667 43,667 43,666
(Stock) -Gain (Profit)
To Bank A/c-Final Payment 1,50,334 1,85,334 30,332 By General Reserve A/c 6,667 6,667 6,666
(Balancing Figure)
1,50,334 2,00,334 50,332 1,50,334 2,00,334 50,332

BANK ACCOUNT
Dr. Cr.
To Balance b/d 20,000 By Realisation A/c—Liabilities 66,000
28 / 32
cont. 8860705297
To Realisation A/c—Assets Realised 4,20,000 By G's Loan A/c—Repayment (Note) 8,000
By D's Capital A/c—Final Payment 1,50,334
By Ts Capital A/c—Final Payment 1,85,334
By G's Capital A/c—Final Payment 30,332
4,40,000 4,40,000
Note: G's Capital Account shows a credit balance of ₹ 30,332 after all adjustments. Hence, his loan has been paid separately. In
case, his Capital Account (after all adjustments) had a debit balance, his Loan Account would have been transferred to his Capital
Account to the extent of debit balance.
57. Books of Surjit and Rahi
Realisation Account
Dr. Cr.
Stock 6,000 Creditors 38,000
Debtors 19,000 Mrs. Surjit's Loan 10,000
Furniture 4,000 Surjit’s Capital A/c (Investment) 8,000
Plant 28,000 Bank:
Investment 10,000 Stock 5,000
Surjit’s Capital A/c 10,000 Debtors 18,500
(Mrs. Surjit's Loan) Furniture 4,500
Bank: Plants 25,000 53,000
Expenses 1,600 Loss transferred to:
Creditors 37,000 38,600 Surjit’s Capital A/c 3,960
Rahi’s Capital A/c 2,640 6,600
1,15,600 1,15,600
Partners’ Capital Account
Dr. Cr.
Particulars Surjit ₹ Rahi ₹ Particulars Surjit ₹ Rahi ₹
Realisation (Investment) 8,000 Balance b/d 10,000 8,000
Realisation (Loss) 3,960 2,640 Realisation (Mrs. Surjit Loan) 10,000
Profit and Loss 4,500 3,000 Reserve 9,000 6,000
Bank 12,540 8,360
29,000 14,000 29,000 14,000

Rahi's Loan Account
Dr. Cr.
Bank 5,000 Balance b/d 5,000
5,000 5,000
Bank Account
Dr. Cr.
29 / 32
cont. 8860705297
Balance b/d 11,500 Realisation (Creditors and Expenses) 38,600
Realisation A/c (Assets realised) 53,000 Rahi’s Loan 5,000
Surjit’s Capital A/c 12,540
Rahi’s Capital A/c 8,360
64,500 64,500
Working note: 1
Loss on Realisation = 6,600
Loss transferred to surjit's capital account = 6,600 × 3/5 = 3,960
Loss transferred to Rahi's capital account = 6,600 × 2/5 = 2,460
Working note: 2
Profit for the year = 7,500
Profit transferred to surjit's capital account = 7,500 × 3/5 = 4,500
Profit transferred to Rahi's capital account = 7,500 × 2/5 = 3,000
Working note: 3
Reserve = 15,000
Share of surjit 15000 × 3/5 = 9,000
Share of rahi 15,000 × 2/5 = 6,000

Other Assets 17,000 Loan 1,500
Stock 7,800 Creditors 6,000 7,500
Debtors 24,200 By Provision for Doubtful Debts 1,200
Bills Receivables 1,000 50,000 By A's Capital A/c
To A's Capital A/c (Creditors) 6,000 Bills Receivable 800
To C's Capital A/c Debtors 17,200 18,000
Loan 1,500 By B's Capital A/c
Interest on Loan 300 1,800 Stock 7,000
To Cash A/c (Expenses) 270 Sundry Assets 7,200 14,200
By C's Capital A/c (Remaining sundry assets) 8,100
By Cash A/c (Debtors) 2,100
By Loss Transferred to
A's Capital A/c 4,182
B's Capital A/c 1,394
C's Capital A/c 1,394 6,970
58,070 58,070
Partners' Capital Account
Particulars A (Rs.) B (Rs.) C (Rs.) Particulars A (Rs.) B (Rs.) C (Rs.)
To Realisation A/c (Assets) 18,000 14,200 8,100 By Balance b/d 27,500 10,000 7,000
To Realisation A/c (Loss) 4,182 1,394 1,394 By Realisation A/c (Liabilities) 6,000 --- 1,800
To Cash A/c (Final Payment) 11,318 --- --- By Cash A/c (Cash brought in) --- 5,594 694
30 / 32
cont. 8860705297
33,500 15,594 9,494 33,500 15,594 9,494
Cash Account
To Balance b/d 3,200 By Realisation A/c 270
To Realisation A/c 2,100 By A's Capital A/c (Final Payment) 11,318
To B's Capital A/c (Cash brought in) 5,594
To C's Capital A/c (Cash brought in) 694
11,588 11,588
Working note:1
Total Loss on realisation = 6970
Loss on Realisation transferred to A's capital account =6970×3/5=4182
Loss on Realisation transferred to B's capital account=6970×1/5=1394
Loss on Realisation transferred to C's capital account =
6970×1/5=1394
Working note 2
Debtors taken over by A 17200 + bill receivable worth 800 =18000
Capital taken over by B stock (7000) +other sundry assets 7200 =14200
7200 ×100/90=8000
Therefore 17000-8000= 9000
Remaining assets taken by C
9000×90/100=8100
Working note 3
Remaining debtors to b collected @ 50%
24200-20000=4200
4200×50/100 =2100
59. State True or False:
(i) (a) True
Explanation: True, On dissolution of a firm, the firm is closed, whereas on dissolution of the partnership, the share
of the outgoing partner is determined and the firm is not closed.
(ii) (b) False
Explanation: False
(iii) (b) False
Explanation: False
(iv) (a) True
Explanation: True, any amount realised from the unrecorded asset is credited to Realisation Account.
(v) (a) True
Explanation: True
(vi) (a) True
Explanation: True, in dissolution, closing balance of Cash Account will be nil at the end.
(vii) (a) True
Explanation: True
60. Fill in the blanks:
(i) 1. debited
(ii) 1. Debited
(iii) 1. Compulsory
(iv) 1. Partners Capital
(v) 1. Firm
31 / 32
cont. 8860705297
61. Read the text carefully and answer the questions:
Vinay, Tripti and Hemant were partners in a partnership firm sharing profits and losses in their capital ratio, i.e., 1 : 2 : 3. On 31st
March 2020, they decided to dissolve the partnership firm. The following information is given to you on the dissolution of the
firm:
The firm had total assets of ₹ 12,00,000 that realized ₹ 10,80,000. The creditors were settled at 90% by paying them ₹ 54,000.
There was an unrecorded asset in the books of the firm which was taken by Vibhuti for ₹ 12,000. Realisation expenses amounted
to ₹ 2,000 and were paid by Tiwari on behalf of the firm. There was general reserve in the books of the company of ₹ 21,000. The
capitals of the partners were in the proportion of their profit sharing ratio. Their balance sheet also showed a cash balance of ₹
81,000.
(i) (a) ₹ 4,00,000
Explanation: In a balance sheet: Total of Assets side = Total of liabilities side
As per the case, total of assets side = ₹ 12,00,000 + ₹ 81,000 = ₹ 12,81,000
Total of Liabilities side = Creditors + General reserve + Capitals of partners (as per the given question)
₹ 12,81,000 = ₹ 60,000 + ₹ 21,000 + Capital of partners
Capitals of partners = ₹ 12,81,000 - ₹ 81,000
= ₹ 12,00,000
Capital of Tiwari = 12,00,000 × = ₹ 4,00,000
2
(ii) (a) ₹ 1,16,000

Explanation:
Realisation Account
Dr. Cr.
Particulars Amount (₹) Particulars Amount (₹)
To Sundry Assets A/c 12,00,000 By Creditors A/c 60,000
To Cash A/c (Payment to creditors) 54,000 By Cash A/c (Assets sold) 10,80,000
To Tripti's Capital A/c To Partner's Capital A/c
(Realisation exp.) 2,000 Vinay 19,333
Tripti 38,667
Hemant 58,000 1,16,000
12,56,000 12,56,000
(iii) (a) Vinay's Captial

Explanation: Vinay's Captial
(iv) (a) ₹ 5,52,500
Explanation: Amount paid to Happu = Capital + Share in General Reserve - Loss on Realization
= ₹ 6,00,000 + ₹ 10,500 - ₹ 58,000
= ₹ 5,52,500
(v) (c) partner's capital account
Explanation: Partner's capital account is credited while recording entry for realisation expenses.
32 / 32
cont. 8860705297

Dissolution Solution

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Dissolution Solution

Uploaded by

Copyright:

Available Formats

Solution

To Realisation A/c 1,200

To Realisation A/c 1,200

2. (c) Transferred to realization account at book value

To Realisation A/c 22,500

Explanation: Calculation of the amount paid to the creditors in full settlement:

Partner's Capital A/c......Dr.

To Partner's Loan A/c

(Being Partner's Loan/drawings transferred to Partner's Capital Account)

(i) L's Capital A/c Dr. 18,000

To Realisation A/c 18,000

(ii) Realisation A/c Dr. 14,250

(iii) Realisation A/c Dr. 1,000

To M's Capital A/c

(iv) L's Capital A/c Dr. 4,000

M's Capital A/c Dr. 3,000

(i) Bank A/c Dr. 2,000

(ii) Disha's Capital A/c Dr. 49,000

(iii) Realisation A/c Dr. 16,200

(iv) Realisation A/c Dr. 13,000

To Mohit's Capital A/c

(v) Bank A/c Dr. 50,000

To Nandan's Loan A/c

(vi) Bank A/c Dr. 12,000

1) Realisation A/c Dr. 1,00,000

To Bank A/c 1,00,000

(Realisation expenses paid)

2) Realisation A/c Dr. 30,000

To Rashim’s Capital A/c 30,000

(Realisation expenses borne by Rashim)

3) Realisation A/c Dr. 70,000

(i) Bank A/c Dr. 40,000

To Realisation A/c 40,000

(iii) Realisation A/c Dr. 30,000

To Bank A/c 30,000

(iv) L's Capital A/c Dr. 1,600

M's Capital A/c Dr. 2,400

To Realisation A/c 4,000

(i) X's Loan A/c Dr. 40,000

(ii) Realisation A/c Dr. 8,800

(iii) Realisation A/c Dr. 15,000

26. Particulars ₹ Particulars ₹

To Debtors 60,000 By Creditors 45,000

To Stock A/c 85,000 By Shanti's Capital A/c 30,600

To Furniture A/c 1,00,000 (Stock)(₹ 34,000 - ₹ 3,400)

To Machinery A/c 1,30,000 By Bank A/c (Assets Realised):

To Bank A/c (Payment): Stock (Remaining) 40,000

Outstanding Bill for Repairs 19,000 Furniture 80,000

Creditors 45,000 64,000 Investment 20,000

By Loss transferred to:

Shanti's Capital A/c 78,720

Satya's Capital A/c 19,680 98,400

i Alok Capital A/c ........Dr. 7.500

Realisation A/c ........Dr. 2.500

(Being expense on realisation paid.)

ii Realisation A/c ........Dr. 2,000

(Being expense on realisation paid.)

iii Realisation A/c ........Dr. 10,000

To Amit Capital A/c 10,000

(Being expense on realisation paid by partner.)

(i) Realisation A/c Dr. 12,000

(ii) Realisation A/c Dr. 400

To A's Capital A/c

(iii) A's Capital A/c Dr. 16,800