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Savkare
Dissolution of a Firm
1. Following is the Balance Sheet of Santosh and Rajesh who shared profits and
losses in the ratio of 3:2.
Balance Sheet
As at 31st December, 2007
Liabilities Rs. Assets Rs.
Capitals : Cash & Bank Balance 6,000
Santosh 50,000 Furniture 30,000
Rajesh 50,000 Investments 10,000
Reserve Fund 10,000 Plant and Machinery 70,000
Santosh’s Loan 1,000 Debtors 7,000
Bills Payable 2,000
Creditors 10,000
1,23,000 1,23,000
2. Following is the Balance Sheet of A, B and C who shared profits and losses
equally:
Balance Sheet
As at 31st March, 2008
Liabilities Rs. Assets Rs.
Capitals Accounts: Building 42,000
A 50,000 Plant and Machinery 23,000
B 20,000 Debtors 40,000
C 5,000 Less: RDD 2,000 38,000
Creditors 50,000 Investments 8,000
Bills Payable 15,000 Stock 35,000
Outstanding Expenses 5,000 Bills Receivable 17,500
Loan from K 10,000 Bank Balance 500
Loan from B 15,000 Profit & Loss A/c 6,000
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S.Y.B.Com. Accountancy & Financial Management Prof. R.N.Savkare
1,70,000 1,70,000
The firm was dissolved on the above date and the assets realized as under:
Building Rs. 48,000; Plant & Machinery Rs. 18,500; Stock Rs. 31,000; Debtors were
allowed a discount of 10% and the balance amount was recovered. C took over the
investments at Rs. 4,500 and A took over the bills receivable at 20% discount. B took
over the bills payable at Rs. 13,000 and other liabilities were discharged at par, except
creditors who allowed a discount of 5%. Dissolution expenses amounting to Rs. 8,000
were paid by A.
3. A, B and C are partners sharing profits & losses in the ratio of 1/2, 1/3 and 1/6
respectively. Due to disputes amongst the partners. The firm was dissolved on 31 st March.
2008 on which date the Balance Sheet of the firm stood as under:
Balance Sheet
As at 31st March, 2008
Liabilities Rs. Assets Rs.
Capitals Accounts: Cash on Hand 12,300
A 1,00,000 Building 1,20,000
B 1,60,000 Plant and Machinery 1,38,500
C 1,00,000 Debtors 91,250
Current Accounts: Stock 90,300
A 17,375 Bills Receivable 24,800
C 14,825 Deferred Advt. Expenditure 44,700
Bank Overdraft 84,000 B’s Current Account 23,150
Creditors 48,000
Bills Payable 20,800
5,45,000 5,45,000
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S.Y.B.Com. Accountancy & Financial Management Prof. R.N.Savkare
4. A, B and C were in partnership sharing profits in the ratio of 2:2:1. The Balance Sheet
of the firm as on 31st December, 2007 was as follows:
3,18,000 3,18,000
On 1st January, 2008; the partners decided to dissolve their partnership on the basis of the
following terms:
a) Debtors realized Rs. 21,190; Stock Rs. 40,100; Plant Rs. 25,000; Building Rs.
1,50,000. Goodwill nil. Joint Life Policy was surrendered.
b) 50 per cent of investments were taken over by A at 75 per cent of their book
value. The remaining investments were taken up B at the market value of 110 per
cent towards repayment of his loan in part.
c) The firm had previously purchased some shares at Rs. 7,500 in a public limited
company and had written them off as worthless. These shares were taken over by
C at Rs. 4,000.
d) A Creditor for Rs. 10,000 accepted patent rights at a discount of 20 percent and
Rs. 1,000 in cash in satisfaction of his claim. Another creditor for Rs. 10,000 was
taken over by B at Rs. 9,500. Remaining creditors were paid at Rs. 19,100.
e) A promised to pay his wife’s loan.
f) Bills payable were due on average basis one month after 31 st December. They
were paid off on 31st December at a discount of 12 percent p.a.
g) There was one unrecorded asset estimated at Rs. 7,600 half of which was handed
over to a creditor (not recorded in books) in settlement of his claim of Rs. 5,000
and the remaining half was sold in the market at Rs. 2,200.
h) B was to look after the dissolution for which he was to be paid Rs. 5,000 subject
to the condition that he bear all the realization expense which came to Rs. 3,800.
The remuneration was paid in cash.
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S.Y.B.Com. Accountancy & Financial Management Prof. R.N.Savkare
5. A, B and C sharing profit in the proportion of 3:2:1 agreed upon dissolution of their
partnership on 31st December, 2007 on which date their Balance Sheet was as under:
1,08,500 1,08,500
The life policy is surrendered for Rs. 12,000. The investments are taken over by A for Rs.
17,500. A agrees to discharge his wife’s loan. B takes over all the stock at Rs. 7,000 and
debtors amounting Rs. 5,000 at Rs. 4,000. Machinery is sold for Rs. 55,000. The
remaining debtors realize 50% of book value. The expenses of realization amount to Rs.
600. It is found that an investment not recorded in the books is worth Rs. 3,000. The
same is taken over by one of the creditor at this value.
Show necessary ledger accounts on completion of the dissolution of the firm.
6. A, B and C were partners sharing profit and losses in the ratio of 3:2:1 respectively. On
account of differences amongst them, they agreed to dissolve the partnership on 31 st
December, 2007, on which date a Balance Sheet was prepared and it stood as under:
1,56,950 1,56,950
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S.Y.B.Com. Accountancy & Financial Management Prof. R.N.Savkare
Interest on drawings to date of dissolution was A Rs. 600, B Rs. 400, C Rs. 200.
A took over goodwill and Plant and Machinery for Rs. 60,000 and agreed to discharge
this wife’s loan and bank overdraft. Furniture and Stock were divided equally between A
and B at an agreed valuation of Rs. 24,000. The book debts were assigned to the creditors
of the firm in full satisfaction of their claim. The agency commission was recovered in
time. A Bill of Rs. 2,000 under discount was returned dishonored with noting charges of
Rs. 70 and subsequently it proved valueless. The expenses of dissolution, viz., Rs. 1,200
were agreed to be borne by A. C agreed to the above arrangement on payment to him Rs.
10,000 in full satisfaction of his right, title and interest in the firm.
7. X, Y and Z are in partnership sharing profits and losses as 3:2:1 respectively. The
Balance Sheet on the date of dissolution was as follows:
67,650 67,650
8. P, Q and R are partners sharing profits and losses in the proportion of one half, one
third and one sixth respectively. The partnership was dissolved on 31 st march, 2008 on
which date the Balance Sheet of the firm was as under:
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S.Y.B.Com. Accountancy & Financial Management Prof. R.N.Savkare
32,913 32,913
Prepare the final accounts of the partners closing the books of the firm and show the
results of the dissolution.
9. A, B and C were carrying on business sharing profits and losses equally. Their Balance
Sheet on 31st December, 2007 stood as follows:
58,000 58,000
Owing to the liability to meet the demands of the creditors, the firm is dissolved. B and C
cannot pay anything, whereas A can contribute only Rs. 1,500 from his private estate.
The Assets were realized as follows:
Stock Rs. 15,000. Debtors Rs. 14,000. Furniture Rs. 1,000. Expenses amounted to Rs.
1,000.
Show the Realisation Account, Cash Account, Sundry Creditor’s Account, Profit & Loss
Account and Capital Accounts of the Partners.
10. Udit, Kumar and Sonu were partners in a firm sharing profit and losses in the ratio of
3:2:1. They decided to dissolve the firm when the state of affairs was as follows:
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S.Y.B.Com. Accountancy & Financial Management Prof. R.N.Savkare
61,000 61,000
Investment was fully taken by Udit in full settlement of his loan. The other assets except
Cash at Bank realized Rs. 47,100. The expenses for dissolution was Rs. 600. A dispute
with a creditor was settled reducing his claim by Rs. 200. Sonu was decalred insolvent
and 25 p. in the rupee was recovered from his estate.
Prepare Realisation Account, Bank Account and Capital Accounts of the partners to close
the books of the firm.