NCERT Solutions | Class 12 Accountancy Chapter 5

NCERT Solutions | Class 12 Accountancy (Not-for-Profit Organisation and Partnership Accounts) Chapter 5 | Dissolution of Partnership Firm 

CBSE Solutions | Accountancy Class 12

Check the below NCERT Solutions for Class 12 Accountancy (Not-for-Profit Organisation and Partnership Accounts) Chapter 5 Dissolution of Partnership Firm Pdf free download. NCERT Solutions Class 12 Accountancy  were prepared based on the latest exam pattern. We have Provided Dissolution of Partnership Firm Class 12 Accountancy NCERT Solutions to help students understand the concept very well.

NCERT | Class 12 Accountancy (Not-for-Profit Organisation and Partnership Accounts)

NCERT Solutions Class 12 Accountancy

Book:	National Council of Educational Research and Training (NCERT)
Board:	Central Board of Secondary Education (CBSE)
Class:	12
Subject:	Accountancy
Chapter:	5
Chapters Name:	Dissolution of Partnership Firm
Medium:	English

Dissolution of Partnership Firm | Class 12 Accountancy | NCERT Books Solutions

You can refer to MCQ Questions for Class 12 Accountancy (Not-for-Profit Organisation and Partnership Accounts) Chapter 5 Dissolution of Partnership Firm to revise the concepts in the syllabus effectively and improve your chances of securing high marks in your board exams.

NCERT Solutions for Class 12 Commerce Accountancy Chapter 5 Dissolution Of Partnership Firm

Question 1:

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

Answer:

Basis of Difference	Dissolution of Partnership	Dissolution of Partnership firm
Meaning	It means change in the partnership deed (or the agreement) among the partners.	It means that the business is wound up and the firm is dissolved.
Discontinuation	Business is not discontinued.	Business is discontinued, as the firm is dissolved.
Closure of Books of Accounts	Books of accounts are not closed, as there is only change in the existing agreement between the partners.	Books of accounts are closed, as the business is discontinued.
Assets and Liabilities	In this case, the assets and liabilities are revalued.	In this case, all the assets are sold off in order to pay the liabilities of the business.
Role of Court	There is no intervention by the court.	Dissolution of a partnership firm may be done with the consent of the court.
Nature	It is voluntary in nature.	It may be voluntary (as per the discretion of the partners) or compulsory (as per the order of the court).
Effect	It may or may not involve dissolution of the firm.	It necessarily involves dissolution of both the partnership as well as of the partnership firm.

 

 

Question 2:

State the accounting treatment for:

i. Unrecorded assets

ii. Unrecorded liabilities

Answer:

i) Accounting Treatment for Unrecorded Assets

 Unrecorded asset is an asset, the value of which has been written off in the books of accounts but the asset is still in usable position. The accounting treatment for unrecorded asset is:

a) When the unrecorded asset is sold for cash

Cash A/c		Dr.
	To Realisation A/c
(Unrecorded assets sold for cash)

 

b) When the unrecorded asset is taken over by any partner

Partner's Capital A/c		Dr.
	To Realisation A/c
(Unrecorded asset taken over by the partner)

 

ii) Accounting Treatment for Unrecorded Liabilities

 Unrecorded liabilities are those liabilities which are not recorded in the books of account. The accounting treatment for unrecorded liability is:

a) When the unrecorded liability is paid off

Realisation A/c		Dr.
	To Cash A/c
(Unrecorded liability paid in cash)

 

b) When the unrecorded liability is taken over by a partner

Realisation A/c		Dr.
	To Partner's Capital A/c
(Unrecorded liability  taken over by the partner)

 

 

Question 3:

On dissolution, how you deal with partner’s loan if it appears on the

(a) Assets side of the Balance Sheet

(b) Liabilities side of the Balance Sheet

Answer:

a) If partner's loan appears on the assets side of the Balance Sheet then it implies that the partner has taken loan from the business and is liable to pay back to the business. In such case, the loan amount is transferred to his capital account. Thus the accounting entry will be:

Partner’s Capital A/c		Dr.
	To Partner's Loan A/c
(Partner's loan transferred to Partner's Capital Account)

 

b) If partner's loan appears on the liabilities side of the Balance Sheet then it implies that the partner has forwarded loan to the firm and the firm is liable to pay back the amount to the partner. In such case, partner's loan is paid off after paying all the external liabilities. The partner's loan is not transferred to the Realisation Account, in fact, it is paid in cash. The following accounting entry is passed.-

Partner’s Loan A/c		Dr.
	To Cash/Bank A/c
(Partner’s loan paid in cash)

 

 

Question 4:

Distinguish between firm’s debts and partner’s private debts.

Answer:

 

Basis of Difference	Firm’s Debts	Partner’s Private Debts
Meaning	It refers to those debts that are borrowed against the name of the firm.	It refers to those debts that are borrowed personally by the partner.
Liability	All the partners of the firm are jointly and separately liable for the firm's debt.	The concerned partner is personally liable for his private debts.
Settlement of debts by private assets	If the firm's debt exceeds the firm’s assets, then private assets of the partners may be utilised to pay back the firm's debt, if only  the partner's  private assets exceeds his/her own private debts.	Private debts are settled against the partner's private assets. Subsequently, if any surplus exists then this may be utilised to settle the firm's debts.
Settlement of debts by firm's assets	Firm's debts are settled against the firm’s assets. Subsequently, if any surplus exists, then this is distributed among the partners.	After paying off firm's debts, the surplus of firm's assets, if any is distributed among the partners.  The personal share of the partner in this surplus can be utilised to settle his/her own private debts.

 

 

Question 5:

State the order of settlement of accounts on dissolution.

Answer:

The following are the rules of settlement of accounts on dissolution as per the Section 48 of Partnership Act 1932.

 

1. Application of Assets: Amount received by the realisation (sale) of the assets shall be used in the following order:

a) First of all the external liabilities and expenses are to be paid.

b) Then, all loans and advances forwarded by the partners should be paid.

c) Then, the capital of each partner should be paid off. If there remains any surplus after the payment of (a), (b) and (c), then it should be distributed among the partners in their profit sharing ratio.

 

2. Treatment of Loss: In case of loss and any deficiency of capital this should be paid in the following order:

a) First these should be adjusted against firm's profits.

b) Then, against the total capital of the firm.

c)Even if  there exists any loss and deficiencies then it should be borne by all the partners individually in their profit sharing ratio.

 

 

Question 6:

On what account realisation account differs from revaluation account.

Answer:

 

Basis of Difference	Realisation Account	Revaluation Account
Meaning	It records the sale of various assets and payment of various liabilities.	It records the effect of revaluation of assets and liabilities on the eve of admission, retirement, death and change in the profit sharing ratio.
Time	It is prepared at the time of dissolution of firm.	It is prepared when admission/retirement/death or change in profit sharing ratio takes place.
Objective	To find profit or loss on realisation of assets and payment of liabilities.	To find out profit or loss on revaluation of assets and liabilities.
Amount	Assets and liabilities are shown at the book value.	Increase or decrease in the value of assets and liabilities are shown in this account.
Records	All assets and liabilities are recorded here.	Only those assets and liabilities are recorded here whose values have changed over a period of time.
Effect	All accounts of assets and liabilities are closed.	No account is closed on revaluation of assets and liabilities.

 

 

 

Question 1:

Explain the process of dissolution of a partnership firm?

Answer:

Dissolution of partnership firm implies discontinuation of the business of the partnership firm. According to the Section 39 of Partnership Act, dissolution of partnership between all the partners of a firm is called dissolution of partnership firm. Dissolution involves winding up of business, disposal of assets and paying off the liabilities and distribution of any surplus or borne of loss by the partners of the firm. As per the Partnership Act 1932, a partnership firm may be dissolved in the following manners:

1) Dissolution by Agreement

A firm may be dissolved with:

a) the consent of all the partners, or

b) the contract between the partners

 

2) Compulsory Dissolution

A firm may be dissolved by:

a) the adjudication of all the partners or of all partners but one as insolvent

b) happening of an event or change in government policies that make the business unlawful.

 

3) Dissolution on the happening of Certain Contingencies

Subject to the contract between the partners, a firm is dissolved

a) if formed for a specific period then on the expiry of the period

b) if formed for a specific purpose then on completion of the purpose

c) on the death of partner/partners

d) on insolvency of a partner/partners

 

4) Dissolution by Notice

If partnership is at will then the partnership firm is dissolved if any partner giving notice in writing to all the other partners expressing his/her intention to dissolve the firm.

 

5) Dissolution by Court

The court may order to dissolve a partnership firm when:

a) a partner becomes insane or lunatic.

b) a partner becomes permanently incapable of performing the duties.

c)  a partner is guilty of misconduct and affects the business activities.

d) a partner repeatedly breaks the terms of agreement .

e) a partner transfers his interest to a third party without the consent of  other partners.

f) a business persistently incurs losses.

 

Besides these above mentioned circumstances, a partnership firm may be dissolved if the court at any stage finds dissolution of the firm to be justified and inevitable.

 

The following are the rules of settlement of accounts on dissolution as per the Section 48 of Partnership Act 1932.

 

1. Application of Assets: Amount received by the realisation (sale) of the assets shall be used in the following order:

a) First of all the external liabilities and expenses are to be paid.

b) Then, all loans and advances forwarded by the partners should be paid.

c) Then, the capital of each partners should be paid off. If there remains any surplus after the payment of (a), (b) and (c), then it should be distributed among the partners in their profit sharing ratio.

 

2. Treatment of Loss: In case of loss and any deficiency of capital, then this should be paid in the following order:

a) First these should be adjusted against firm's profits.

b) Then, against the total capital of the firm.

c) If still there exists any loss and deficiencies, then it should be borne by all the partners individually in their profit sharing ratio.

 

 

Question 2:

What is a Realisation Account?

Answer:

On dissolution of a firm, all the books of account are closed, all assets are sold and all liabilities are paid off. In order to record the sale of assets and discharge of liabilities, a nominal account is opened named Realisation Account. The main purpose to open Realisation Account is to ascertain the profit or loss due to the realisation of assets and liabilities. Realisation profit (if credit side > debit side) or realisation loss (if debit side > credit side) are transferred to the Partner's Capital Account in their profit sharing ratio.

 

Concisely, following are the important objectives of preparing Realisation Account.

1) To close all the books of account.

2) To record transactions relating to the sale of assets and discharge of liabilities.

3) To determine profit or loss due to the realisation of assets and liabilities.

 

Accounting treatment of items related to Realisation Account

 

1) For transfer of assets

 

Realisation A/c		Dr.
	To Sundry Assets A/c (Individually)
(All Assets transferred to realisation account, except Cash/Bank, P and L debit balance, Loan to a Partner)

 

2) For transfer of liabilities

 

Sundry Liabilities A/c (Individually)		Dr.
	To Realisation A/c
(All Liabilities transferred to Realisation account except Partner's Capitals, P and L credit balance, Loan from Partner)

 

3) For sale of assets

 

Bank A/c (Amount received)		Dr.
	To Realisation A/c
(Assets sold for cash)

 

4) For payment of liabilities

 

Realisation A/c		Dr.
	To Bank A/c
(Liabilities paid in cash)

 

5) For payment of realisation expenses

 

Realisation A/c		Dr.
	To Bank A/c
(Expenses paid)

 

6) For transfer of profit on realisation

 

Realisation A/c		Dr.
	To Partner's Capital A/c
(Profit on realisation transferred to partner 's capital account)

 

7) For transfer of loss on realisation

 

Partner's Capital A/c		Dr.
	To Realisation A/c
(Loss transferred to partner's capital account)

 

Format of Realisation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars		Amount Rs
Various Assets (Excluding Cash/Bank, fictitious assets, Debit balance of P and L A/c, partner Capital A/c, Current A/c, Loan to Partner)   Cash/Bank (Payment for realisation expenses)     Cash/Bank (Payment to outside and unrecorded liabilities)     Partner's Capital A/c (If any liability taken on expenses paid by him or remuneration payable to him)   Partner Capital A/c (Profit on realisation distributed in the profit sharing ratio among all the partners)	–         –               –       –	Various Liabilities (Excluding Partner Capital account, reserves, P and L A/c, Current A/c, Loan to Partner)     Provision on assets (like, Provision for doubtful debts; Provision for depreciation)   Cash/Bank (Amount received from realisation of assets and unrecorded assets)   Partner 's Capital A/c (If any asset taken over by any partner)     Partner Capital A/c (Loss on realisation borne by all the partners in their profit sharing ratio)		–         –               –       –
	–			–

 

 

Question 3:

Reproduce the format of Realisation Account.

Answer:

     

Format of Realisation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars		Amount Rs
Various Assets (Excluding Cash/Bank, fictitious assets, Debit balance of P and L A/c, partner Capital A/c, Current A/c, Loan to Partner)   Cash/Bank (Payment for realisation expenses)     Cash/Bank (Payment to outside and unrecorded liabilities)     Partner's Capital A/c (If any liability taken on expenses paid by him or remuneration payable to him)   Partner Capital A/c (Profit on realisation distributed in the profit sharing ratio among all the partners)	–         –               –       –	Various Liabilities (Excluding Partner Capital account, reserves, P and L A/c, Current A/c, Loan to Partner)     Provision on assets (like, Provision for doubtful debts; Provision for depreciation)   Cash/Bank (Amount received from realisation of assets and unrecorded assets)   Partner 's Capital A/c (If any asset taken over by any partner)     Partner Capital A/c (Loss on realisation borne by all the partners in their profit sharing ratio)		–         –               –       –
	–			–

 

 

Question 4:

How deficiency of creditors is paid off?

Answer:

At the time of dissolution of a firm, the amount received from the sale of firm's assets are utilised to pay the creditors. If the sale receipts fall short, then partners' private assets are used for settling the dues of the firm's creditors. Even if some portion of the amount due to creditors is left unpaid, then there arises deficiency of creditors. There are generally two procedures to be followed to treat the deficiency of creditors.

1. Transferring deficiency to the Deficiency Account

2. Transferring deficiency to the Partner's Capital Account

In the former procedure, a separate account is prepared for the firm's creditors. Then in order to ascertain the firm's cash balance accruing from the sale of the firm's assets and partners' private assets, Cash Account is prepared. After ascertaining the cash availability with the firm, the creditors and the external liabilities are paid proportionately (partially). The remaining unpaid creditors or the deficiency is transferred to the Deficiency Account.

In the latter procedure, creditors are paid by the cash available with the firm including the partners individual contribution. The deficiency or unpaid creditors amount is transferred to the Partner's Capital Account. Thus the deficiency of the creditors is borne by all the partners in their profit sharing ratio. If any partner becomes insolvent and is unable to bear the deficiency, then this will be regarded as a capital loss to the firm. If the partnership deed is silent about such capital loss in the facet of insolvency of a partner, then according to the Garner v/s Murray case, such capital loss need to be borne by the solvent partners in their capital ratio.

Question 1:

Journalise the following transactions regarding Realisation expenses:

[a] Realisation expenses amounted to Rs 2,500.

[b] Realisation expenses amounting to Rs 3,000 were paid by Ashok, one of the partners.

[c] Realisation expenses Rs 2,300 borne by Tarun, personally.

[d] Amit, a partner was appointed to realise the assets, at a cost of Rs 4,000. The actual amount of Realisation amounted to Rs 3,000.

Answer:

 

 

Journal
	Particulars			L.F.	Amount Rs	Amount Rs
(a)	Realisation A/c		Dr.		2,500
	To Bank A/c					2,500
	(Realisation expenses paid)
(b)	Realisation A/c		Dr.		3,000
	To Ashok’s Capital A/c					3,000
	(Realisation expenses paid by Ashok)
(c)	No entry, as all Realisation expenses are borne personally by Tarun
(d)	Realisation A/c		Dr.		4,000
	To Amit’s Capital A/c					4,000
	(Realisation expenses paid to Amit)

 

 

Question 2:

Record necessary journal entries in the following cases:

[a] Creditors worth Rs 85,000 accepted Rs 40,000 as cash and Investment worth Rs 43,000, in full settlement of their claim.

[b] Creditors were Rs 16,000. They accepted Machinery valued at Rs 18,000 in settlement of their claim.

[c] Creditors were Rs 90,000. They accepted Buildings valued Rs 1,20,000 and paid cash to the firm Rs 30,000.

Answer:

 

Journal
	Particulars			L.F.	Amount Rs	Amount Rs
(a)	Realisation A/c		Dr.		40,000
	To Cash A/c					40,000
	(Creditors worth Rs 85,000 accepted 40,000 as cash and investment worth Rs 43,000 in their full settlement)
(b)	No Entry
	(Creditors Rs 16,000 accepted Machinery Rs 18,000 in the full settlement. No entry is required since both asset and liability are already transferred to the Realisation Account)
(c)	Cash A/c		Dr.		30,000
	To Realisation A/c					30,000
	(Creditors worth Rs 90,000 accepted buildings worth Rs 1,20,000 and returned Rs 30,000 as cash after settlement of claim to the firm)

 

 

Question 3:

There was an old computer which was written-off in the books of Accounts in the pervious year. The same has been taken over by a partner Nitin for Rs 3,000. Journalise the transaction, supposing. That the firm has been dissolved.

Answer:

 

Journal
Particulars		L.F.	Amount Rs	Amount Rs
Nitin’s Capital A/c	Dr.		3,000
To Realisation A/c				3,000
(Unrecorded computer taken over by Nitin)

 

 

Question 4:

What journal entries will be recorded for the following transactions on the dissolution of a firm:

[a] Payment of unrecorded liabilities of Rs 3,200.

[b] Stock worth Rs 7,500 is taken by a partner Rohit.

[c] Profit on Realisation amounting to Rs 18,000 is to be distributed between the partners Ashish and Tarun in the ratio of 5:7.

[d] An unrecorded asset realised Rs 5,500.

Answer:

 

Journal
	Particulars			L.F.	Amount Rs	Amount Rs
(a)	Realisation A/c		Dr.		3,200
	To Bank A/c					3,200
	(Unrecorded liabilities paid)
(b)	(Rohit’s Capital A/c		Dr.		7,500
	To Realisation A/c					7,500
	(Stock is taken over by Rohit)
(c)	Realisation A/c		Dr.		18,000
	To Ashish’s Capital A/c					7,500
	To Tarun’s Capital A/c					10,500
	(Profit on Realisation is transferred to Partners’ Capital Account)
(d)	Bank A/c		Dr.		5,500
	To Realisation A/c					5,500
	(Unrecorded asset sold)

 

 

Question 5:

Give journal entries for the following transactions:

1. To record the Realisation of various assets and liabilities,

2. A Firm has a Stock of Rs 1,60,000. Aziz, a partner took over 50% of the Stock at a discount of 20%,

3. Remaining Stock was sold at a profit of 30% on cost,

4. Land and Buildging (book value Rs 1,60,000) sold for Rs 3,00,000 through a broker who charged 2%, commission on the deal,

5. Plant and Machinery (book value Rs 60,000) was handed over to a Creditor at an agreed valuation of 10% less than the book value,

6. Investment whose face value was Rs 4,000 was realised at 50%.

Answer:

 

Journal
	Particulars			L.F.	Amount Rs	Amount Rs
1)
(a)	For Transfer of Assets
	Realisation A/c		Dr.		-
	To Assets A/c (Individually)					-
	(Assets transferred to Realisation Account)
(b)	For Transfer of Liabilities
	Liabilities A/c (Individually)		Dr.		-
	To Realisation A/c					-
	(Liabilities transferred to Realisation Account)
(c)	For sale of Asset
	Cash/Bank A/c		Dr.		-
	To Realisation A/c					-
	(Assets sold)
(d)	For liabilitiy paid
	Realisation A/c		Dr.		-
	To Cash/Bank A/c					-
	(Liabilities paid)
2)	Aziz’s Capital A/c		Dr.		64,000
	To Realisation A/c					64,000
	(Aziz, a partner took over 50% of stock at 20% discount, the value of the total stock  was Rs 1,60,000) [1,60,000 × (50/100) × (80/100) = Rs 64,000]
3)	Bank A/c		Dr.		1,04,000
	To Realisation A/c					1,04,000
	(Stock worth Rs 80,000  sold at a profit of 30% on cost) [80,000 × (130/100 = Rs 1,04,000)]
4)	Bank A/c		Dr.		2,94,000
	To Realisation A/c					2,94,000
	(Land and Building sold for Rs 3,00,000 and 2% commission paid to the broker)
5)	No entry
	(Plant and Machinery Rs 60,000 handed over to the creditors at a discount of 10%.  No entry is required as both the asset and liability are already transferred to the Realisation Account)
6)	Bank A/c		Dr.		2,000
	To Realisation A/c					2,000
	(Investments worth Rs 4,000 were realised at 50%)

 

NOTE: In this chapter, it has been assumed that all receiving and payments are made through bank.

 

 

Question 6:

How will you deal with the Realisation expenses of the firm of Rashim and Bindiya in the following cases:

1. Realisation expenses amounts to Rs 1,00,000,

2. Realisation expenses amounting to Rs 30,000 are paid by Rashim, a partner.

3. Realisation expenses are to be borne by Rashim for which he will be paid Rs 70,000 as remuneration for completing the dissolution process. The actual expenses incurred by Rashim were Rs 1,20,000.

Answer:

 

 

Books of Rashim and Bindiya   Journal
	Particulars			L.F.	Amount Rs	Amount Rs
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
	To Rashim’s Capital A/c					70,000
	(Realisation expenses borne by Rashim and remuneration to him for dissolution Rs 70,000)

 

 

Question 7:

The book value of assets (other than cash and bank) transferred to Realisation Account is Rs 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.

Answer:

 

 

Journal
Particulars			L.F.	Amount Rs	Amount Rs
Realisation A/c		Dr.		1,00,000
To Sundry Assets A/c					1,00,000
(Assets other than cash and bank transferred to Realisation Account)
Atul’s Capital A/c		Dr.		40,000
To Realisation A/c					40,000
(Atul took over 50% of assets worth Rs 1,00,000 at 20% discount) [1,00,000 × (50/100) × (80/100)]
Bank A/c		Dr.		26,000
To Realisation A/c					26,000
(Assets worth Rs 20,000, i.e. 40% of assets of Rs 50,000 are sold at a profit of 30%) [50,000 × (40/100) × (130/100)]
No entry is made for obsolescence of the assets and the assets given to the creditors in the full settlement as these are already transferred to the Realisation Account and adjusted)

 

 

Question 8:

Record necessary journal entries to record the following unrecorded assets and liabilities in the books of Paras and Priya:

1. There was an old furniture in the firm which had been written-off completely in the books. This was sold for Rs 3,000,

2. Ashish, an old customer whose Account for Rs 1,000 was written-off as bad in the previous year, paid 60%, of the amount,

3. Paras agreed to take over the firm’s goodwill (not recorded in the books of the firm), at a valuation of Rs 30,000,

4. There was an old typewriter which had been written-off completely from the books. It was estimated to realize Rs 400. It was taken away by Priya at an estimated price less 25%,

5. There were 100 shares of Rs 10 each in Star Limited acquired at a cost of Rs 2,000 which had been written-off completely from the books. These shares are valued @ Rs 6 each and divided among the partners in their profit sharing ratio.

Answer:

 

Books of Paras and Priya   Journal
	Particulars			L.F.	Amount Rs	Amount Rs
1)	Bank A/c		Dr.		3,000
	To Realisation A/c					3,000
	(Unrecorded furniture sold)
2)	Bank A/c		Dr.		600
	To Realisation A/c					600
	(Bad Debt recovered which was previously written off as bad)
3)	Paras’s Capital A/c		Dr.		30,000
	To Realisation A/c					30,000
	(Unrecorded goodwill taken over by Paras)
4)	Priya’s Capital A/c		Dr.		300
	To Realisation A/c					300
	(Unrecorded Typewriter estimated Rs 400 taken over by Priya at 25% less price)
5)	Paras’s Capital A/c		Dr.		300
	Priya’s Capital A/c		Dr.		300
	To Realisation A/c					600
	(100 shares of Rs 10 each  which were not recorded in the books  taken @ Rs 6 each by Paras and Priya and divided between them in their profit sharing ratio)

 

 

Question 9:

All partners wish to dissolve the firm. Yastin, a partner wants that her loan of Rs 2,00,000 must be paid off before the payment of capitals to the partners. But, Amart, another partner wants that the capitals must be paid before the payment of Yastin’s loan. You are required to settle the conflict giving reasons.

Answer:

As per section 48 of Partnership Act 1932, at the time of dissolution, loans and advances from the partners must be paid off before the settlement of their capital accounts. Hence, Yastin’s argument is correct that her loan of Rs 2,00,000 must be paid off before the payment of partners' capital.

Question 10:

What journal entries would be recorded for the following transactions on the dissolution of a firm after various assets (other than cash) on the third party liabilities have been transferred to Reliasation Account.

1. Arti took over the Stock worth Rs 80,000 at Rs 68,000.

2. There was unrecorded Bike of Rs 40,000 which was taken over By Mr. Karim.

3. The firm paid Rs 40,000 as compensation to employees.

4. Sundry creditors amounting to Rs 36,000 were settled at a discount of 15%.

5. Loss on Realisation Rs 42,000 was to be distributed between Arti and Karim in the ratio of 3:4.

Answer:

 

 

Journal
	Particulars			L.F.	Amount Rs	Amount Rs
1	Arti’s Capital A/c		Dr.		68,000
	To Realisation A/c					68,000
	(Arti took over stock worth Rs 80,000 at Rs 68,000)
2.	Karim’s Capital A/c		Dr.		40,000
	To Realisation A/c					40,000
	(Karim took over an unrecorded bike of  Rs 40,000)
3.	Realisation A/c		Dr.		40,000
	To Bank A/c					40,000
	(Compensation paid to the employees )
4.	Realisation A/c		Dr.		30,600
	To Bank A/c					30,600
	(Creditors amounting Rs 36,000 were settled at a discount of 15%) [36,000 × (85/100)]
5.	Arti’s Capital A/c		Dr.		18,000
	Karim’s Capital A/c		Dr.		24,000
	To Realisation A/c					42,000
	(Loss on Realisation transferred to Partners’ Capital Account)

 

Question 11:

 

Rose and Lily shared profits in the ratio of 2:3. Their Balance Sheet on March 31, 2017 was as follows:

 

Balance Sheet of Rose and Lily as on March 31, 2017
Liabilities	Amount Rs	Assets		Amount  Rs
Creditors	40,000	Cash		16,000
Lily’s loan	32,000	Debtors	80,000
Profit and Loss	50,000	Less: Provision for doubtful Debts	3,600	76,400
Capitals:
Lily	1,60,000	Inventory		1,09,600
Rose	2,40,000	Bills Receivable		40,000
		Buildings		2,80,000
	5,22,000			5,22,000

 

Rose and Lily decided to dissolve the firm on the above date. Assets (except bills receivables) realised Rs 4,84,000.  Creditors agreed to take Rs 38,000. Cost of Realisation was Rs 2,400. There was a Motor Cycle in the firm which was bought out of the firm’s money, was not shown in the books of the firm. It was now sold for Rs 10,000. There was a contingent liability in respect of outstanding electric bill of Rs 5,000, Bill Receivable taken over by Rose at Rs 33,000.

Show Realisation Account, Partners Capital Account, Loan Account and Cash Account.

 

 

Answer:

 

 

Books of Rose and Lily   Realisation Account
Dr.						Cr.
Particulars			Amount Rs	Particulars		Amount Rs
Debtors			80,000	Provision for Doubtful Debts		3,600
Inventory			1,09,600	Creditors		40,000
Bills Receivables			40,000	Cash:
Buildings			2,80,000	Motor cycle	10,000
Cash:				Other Assets	4,84,000	4,94,000
Outstanding Electricity Bill		5,000		Rose’s Capital (Bills Receivable)		33,000
Creditors		38,000
Expenses		2,400	45,400
Profit transferred to:
Rose' Capital		6,240
Lily's Capital		9,360	15,600
			5,70,600			5,70,600

 

Partners’ Capital Accounts
Dr.						Cr.
Particulars		Rose	Lily	Particulars	Rose	Lily
Realisation  (Bills Receivable)		33,000		Balance b/d	2,40,000	1,60,000
Cash A/c		2,33,240	1,99,360	Profit and Loss	20,000	30,000
				Realisation  (Profit)	6,240	9,360
		2,66,240	1,99,360		2,66,240	1,99,360

 

Lily's Loan Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Cash		32,000	Balance b/d	32,000
		32,000		32,000

 

Cash Account
Dr.							Cr.
Particulars			Amount Rs	Particulars		Amount Rs
Balance b/d			16,000	Realisation:
Realisation:				Creditors	38,000
Motor Cycle		10,000		Outstanding Electricity Bill	5,000
Other Assets		4,84,000	4,94,000	Expenses	2,400	45,400
				Lily's Loan		32,000
				Rose’s Capital A/c		2,33,240
				Lily’s Capital A/c		1,99,360
			5,10,000			5,10,000

 

Note: In the solution Contingent Liability of Electricity Bill has been treated as Electricity Bill Payable.

 

Question 12:

 

Shilpa, Meena and Nanda decided to dissolve their partnership on March 31,2017. Their profit sharing ratio was 3:2:1 and their Balance Sheet was as under:

 

Balance Sheet of Shilpa, Meena and Nanda as on March 31, 2017
Liabilities	Amount Rs	Assets	Amount Rs
Capitals:		Land	81,000
Shilpa	80,000	Stock	56,760
Meena	40,000	Debtors	18,600
Bank loan	20,000	Nanda’s Capital Account	23,000
Creditors	37,000	Cash	10,840
Provision for doubtful debts	1,200
General Reserve	12,000
	1,90,200		1,90,200

 

The stock of value of Rs 41,660 are taken over by Shilpa for Rs 35,000 and she agreed to discharge bank loan. The remaining stock was sold at Rs 14,000 and debtors amounting to Rs 10,000 realised Rs 8,000. land is sold for Rs 1,10,000. The remaining debtors realised 50% at their book value. Cost of Realisation amounted to Rs 1,200. There was a typewriter not recorded in the books worth Rs 6,000 which were taken over by one of the Creditors at this value. Prepare Realisation Account.

 

 

Answer:

 

 

In the books of Shilpa, Meena and Nanda
Realisation Account
Dr.								Cr.
Particulars			Amount Rs	Particulars			Amount Rs
Land			81,000	Bank Loan			20,000
Stock			56,760	Creditors			37000
Debtors			18,600	Provision for doubtful debts			1,200
Shilpa’s Capital A/c			20,000	Shilpa’s Capital A/c (Stock)			35,000
Cash :				Cash:
Creditors		31000		Stock		14000
Realisation Expenses		1,200	32200	Debtors		12300
Profit transferred to				Land		1,10,000	1,36,300
Shilpa’s Capital A/c		10,470
Meena’s Capital A/c		6,980
Nanda’s Capital A/c		3,490	20,940
			2,29,500				2,29,500

 

Partners’ Capital Account
Dr.							Cr.
Particulars		Shilpa	Meena	Nanda	Particulars	Shilpa	Meena	Nanda
Balance b/d		–	–	23,000	Balance b/d	80,000	40,000	–
Realisation		35,000			General Reserve	6,000	4,000	2,000
(Stock)					Realisation	20,000
Cash		81,470	50,980		(Bank Loan)
					Realisation (Profit)	10,470	6,980	3,490
					Cash			17,510
		1,16,470	50,980	23,000		1,16,470	50,980	23,000

 

Cash Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Balance b/d		10,840	Realisation (Expenses)	32,200
Realisation (Assets)		1,36,300	Shilpa’s Capital A/c	81,470
Nanda’s Capital A/c		17,510	Meena’s Capital A/c	50,980
		1,64,650		1,64,650

 

 

Question 13:

 

Surjit and Rahi were sharing profits (losses) in the ratio of 3:2, their Balance Sheet as on March 31, 2017 is as follows:

 

Balance Sheet of Surjit and Rahi as on March 31, 2017
Liabilities	Amount Rs	Assets	Amount Rs
Creditors	38,000	Bank	11,500
Mrs. Surjit loan	10,000	Stock	6,000
Reserve	15,000	Debtors	19,000
Rahi’s loan	5,000	Furniture	4,000
Capital’s:		Plant	28,000
Surjit	10,000	Investment	10,000
Rahi	8,000	Profit and Loss	7,500
	86,000		86,000

 

The firm was dissolved on March 31, 2017 on the following terms:

1. Surjit agreed to take the investments at Rs 8,000 and to pay Mrs. Surjit’s loan.

2. Other assets were realised as follows:

Stock	Rs	5,000
Debtors	Rs	18,500
Furniture	Rs	4,500
Plant	Rs	25,000

3. Expenses on Realisation amounted to Rs 1,600.

4. Creditors agreed to accept Rs 37,000 as a final settlement.

You are required to prepare Realisation Account, Partners’ Capital Account and Bank Account.

 

 

Answer:

 

Books of Surjit and Rahi   Realisation Account
Dr.						Cr.
Particulars			Amount Rs	Particulars		Amount Rs
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:				Plant	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
Bank		12,540	8,360	Reserve		9,000	6,000
		29,000	14,000			29,000	14,000

 

Rahi's Loan Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
			Balance b/d	5,000
Bank		5,000
		5,000		5,000

 

Bank Account
Dr.						Cr.
Particulars		Amount Rs	Particulars		Amount Rs
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

 

 

Question 14:

 

Rita, Geeta and Ashish were partners in a firm sharing profits/losses in the ratio of 3:2:1. On March 31, 2017 their balance sheet was as follows:

 

Liabilities		Amount Rs	Assets	Amount Rs
Capitals:			Cash	22,500
Rita	80,000		Debtors	52,300
Geeta	50,000		Stock	36,000
Ashish	30,000	1,60,000	Investments	69,000
Creditors		65,000	Plant	91,200
Bills payable		26,000
General reserve		20,000
		2,71,000		2,71,000

 

On the date of above mentioned date the firm was dissolved:

1. Rita was appointed to realise the assets. Rita was to receive 5% commission on the rate of assets (except cash) and was to bear all expenses of Realisation,

2. Assets were realised as follows:

	Rs
Debtors	30,000
Stock	26,000
Plant	42,750

3. Investments were realised at 85% of the book value,

4. Expenses of Realisation amounted to Rs 4,100,

5. Firm had to pay Rs 7,200 for outstanding salary not provided for earlier,

6. Contingent liability in respect of bills discounted with the bank was also materialised and paid off Rs 9,800,

Prepare Realisation Account, Capital Accounts of Partners’ and Cash Account.

 

 

Answer:

 

In the books of Rita, Geeta and Ashish   Realisation Account
Dr.								Cr.
Particulars				Amount Rs	Particulars		Amount Rs
Debtors				52,300	Creditors		65,000
Stock				36,000	Bills Payable		26,000
Investment				69,000	Cash:
Plant				91,200	Debtors	30,000
Cash:					Stock	26,000
Outstanding Salaries			7,200		Plant	42,750
Discounted Bill			9,800		Investment	58,650	1,57,400
Creditors			65,000
Bills Payable			26,000	1,08,000	Loss transferred to
Rita’s Capital A/c				7,870	Rita’s Capital A/c	57,985
(Commission- 1,57,400 ´ 5/100)					Geeta’s Capital A/c	38,657
					Ashish’s Capital A/c	19,328	1,15,970
				364370			364370

 

Partners’ Capital Account
Dr.								Cr.
Particulars		Rita	Geeta	Ashish	Particulars	Rita	Geeta	Ashish
Realisation (Loss)		57,985	38,657	19,328	Balance b/d	80,000	50,000	30,000
Bank		39,885	18,010	14,005	General Reserve	10,000	6,667	3,333
					Realisation	7,870
		97,870	56667	33333		97870	56,667	33,333

 

Cash Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Balance b/d		22,500	Realisation A/c	1,08,000
Realisation		1,57,400	Rita’s Capital	39,885
			Geeta’s Capital A/c	18,010
			Ashish’s Capital A/c	14,005
		1,79,900		1,79,900

 

NOTE: As per the solution, the total of Cash Account should be Rs 1,79,900; however, the answer given in the book shows Rs 1,65,705.

 

 

Question 15:

 

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

 

Balance Sheet of Anup and Sumit as on December 31, 2017
Liabilities		Amount Rs	Assets	Amount Rs
Sundry Creditors		27,000	Cash at bank	11,000
Reserve fund		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:

 

	Rs
Lease hold land	72,000
Furniture	22,500
Stock	40,500
Plant	48,000
Sundry Debtors	10,500

 

The Creditors were paid Rs 25,500 in full settlement. Expenses of Realisation amount to Rs 2,500.

Prepare Realisation Account, Bank Account, Partners Capital Accounts to close the books of the firm.

 

 

Answer:

 

 

Books of Anup and Sumit   Realisation Account
Dr.							Cr.
Particulars			Amount Rs	Particulars		Amount Rs
Sundry Debtors			12,000	Sundry Creditors		27,000
Plants			47,000	Loan		40,000
Stock			42,000	Bank:
Lease hold land			60,000	Lease hold Land	72,000
Furniture			25,000	Furniture	22,500
Bank:				Stock	40,500
Creditors		25,500		Plant	48,000
Loan		40,000		Sundry Debtors	10,500	1,93,500
Expenses		2500	68,000
Profit transferred to
Anup’s Capital A/c		3,250
Sumit’s Capital A/c		3250	6,500
			2,60,500			2,60,500

 

Partners’ Capital Account
Dr.							Cr.
Particulars		Anup	Sumit	Particulars	Anup	Sumit
Bank		68,250	68,250	Balance b/d	60,000	60,000
				Reserve Fund	5,000	5,000
				Realisation	3,250	3,250
		68,250	68,250		68,250	68,250

 

Bank Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Balance b/d		11,000	Realisation (Expenses and Liabilities)	68,000
Realisation (Assets )		1,93,500	Anup’s Capital A/c	68,250
			Sumit’s Capital A/c	68,250
		2,04,500		2,04,500

 

 

 

Question 16:

 

Ashu and Harish are partners sharing profit and losses as 3:2. They decided to dissolve the firm on December 31, 2017. Their balance sheet on the above date was:

 

Balance Sheet of Ashu and Harish as on December 31, 2017
Liabilities		Amount Rs	Assets	Amount Rs
Capitals:			Building	80,000
Ashu	1,08,000		Machinery	70,000
Harish	54,000	1,62,000	Furniture	14,000
Creditors		88,000	Stock	20,000
Bank overdraft		50,000	Investments	60,000
			Debtors	48,000
			Cash in hand	8,000
		3,00,000		3,00,000

 

Ashu is to take over the building at Rs 95,000 and Machinery and Furniture is take over by Harish at value of Rs 80,000. Ashu agreed to pay Creditor and Harish agreed to meet Bank overdraft. Stock and Investments are taken by both partner in profit sharing ratio. Debtors realised for Rs 46,000, expenses of Realisation amounted to Rs 3,000. Prepare necessary ledger Account.

 

 

Answer:

 

Books of Ashu and Harish   Realisation Account
Dr.						Cr.
Particulars			Amount Rs	Particulars	Amount Rs
Building			80,000	Creditors	88,000
Machinery			70,000	Bank overdraft	50,000
Furniture			14,000	Ashu’s Capital A/c (Assets taken)	1,43,000
Stock			20,000	Harish’s Capital A/c (Assets taken)	1,12,000
Investments			60,000	Cash  (Debtors)	46,000
Debtors			48,000
Ashu’s Capital A/c (Creditors)			88,000
Harish’s Capital A/c (Bank Overdraft)			50,000
Cash (Expenses)			3,000
Profit transferred to
Ashu’s Capital A/c		3,600
Harish’s Capital A/c		2,400	6,000
			4,39,000		4,39,000

 

Partners’ Capital Account
Dr.							Cr.
Particulars		Ashu	Harish	Particulars	Ashu	Harish
Realisation (Assets taken)		1,43,000	1,12,000	Balance b/d	1,08,000	54,000
Cash		56,600		Realisation (Liabilities)	88,000	50,000
				Realisation (Profit)	3,600	2,400
				Cash		5,600
		1,99,600	1,12,000		1,99,600	1,12,000

 

Cash Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Balance b/d		8,000	Realisation (Expenses)	3,000
Realisation (Debtors)		46,000	Ashu’s Capital A/c	56,600
Harish’s Capital A/c		5,600
		59,600		59,600

 

NOTE: As per the solution, the Profit on Realisation is Rs 6,000; however, the answer mentioned in the book is Rs 6,000 as loss on realisation.

 

Working Notes:

	Ashu	Harish
Building	95,000
Machinery and Furniture		80,000
Stock (3:2)	12,000	8,000
Investment (3:2)	36,000	24,000
	Rs 1,43,000	Rs 1,12,000

 

 

Question 17:

 

Sanjay, Tarun and Vineet shared profit in the ratio of 3:2:1. On December 31,2017 their balance sheet was as follows:

 

Balance Sheet of Sanjay, Tarun and Vineet as on December 31, 2017
Liabilities		Amount Rs	Assets	Amount Rs
Capitals:			Plant	90,000
Sanjay	1,00,000		Debtors	60,000
Tarun	1,00,000		Furniture	32,000
Vineet	70,000	2,70,000	Stock	60,000
Creditors		80,000	Investments	70,000
Bills payable		30,000	Bills receivable	36,000
			Cash in hand	32,000
		3,80,000		3,80,000

 

On this date the firm was dissolved. Sanjay was appointed to realise the assets. Sanjay was to receive 6% commission on the sale of assets (except cash) and was to bear all expenses of Realisation.

Sanjay realised the assets as follows: Plant Rs 72,000, Debtors Rs 54,000, Furniture Rs 18,000, Stock 90% of the book value, Investments Rs 76,000 and Bills receivable Rs 31,000. Expenses of Realisation amounted to Rs 4,500.

Prepare Realisation Account, Capital Accounts and Cash Account

 

 

Answer:

 

 

Books of Sanjay, Tarun and Vineet   Realisation Account
Dr.							Cr.
Particulars			Amount Rs	Particulars		Amount Rs
Plant			90,000	Creditors		80,000
Debtors			60,000	Bills Payable		30,000
Furniture			32,000	Cash:
Stock			60,000	Plant	72,000
Investment			70,000	Debtors	54,000
Bills Receivable			36,000	Furniture	18,000
Cash :				Stock	54,000
Creditors		80,000		Investments	76,000
Bills Payable		30,000	1,10,000	Bills Receivable	31,000	3,05,000
Sanjay’s Capital A/c			18,300	Loss transferred to
(6% commission)				Sanjay’s Capital	30,650
				Tarun’s Capital A/c	20,433
				Vineet’s Capital A/c	10,217	61,300
			4,76,300			4,76,300

 

Partners’ Capital Account
Dr.									Cr.
Particulars		Sanjay	Tarun	Vineet	Particulars	Sanjay	Tarun	Vineet
Realisation (Loss)		30,650	20,433	10,217	Balance b/d	1,00,000	1,00,000	70,000
Cash		87,650	79,567	59,783	Realisation (commission)	18,300
		1,18,300	1,00,000	70,000		1,18,300	1,00,000	70,000

 

Cash Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Balance b/d		32,000	Realisation	1,10,000
Realisation		3,05,000	Sanjay’s Capital A/c	87,650
			Tarun’s Capital A/c	79,567
			Vineet’s Capital A/c	59,783
		3,37,000		3,37,000

 

 

 

Question 18:

 

The following is the Balance Sheet of Gupta and Sharma as on December 31,2017:

 

Balance Sheet of Gupta and Sharma as on December 31, 2017
Liabilities		Amount Rs	Assets	Amount Rs
Sundry Creditors		38,000	Cash at Bank	12,500
Mrs.Gupta’s loan		20,000	Sundry Debtors	55,000
Mrs.Sharma’s loan		30,000	Stock	44,000
Reserve fund		6,000	Bills Receivable	19,000
Provision of doubtful debts		4,000	Machinery	52,000
Capital			Investment	38,500
Gupta	90,000		Fixtures	27,000
Sharma	60,000	1,50,000
		2,48,000		2,48,000

 

The firm was dissolved on December 31, 2017 and asset realised and settlements of liabilities as follows:

(a) The Realisation of the assets were as follows:

	Rs
Sundry Debtors	52,000
Stock	42,000
Bills receivable	16,000
Machinery	49,000

(b) Investment was taken over by Gupta at agreed value of Rs 36,000 and agreed to pay of Mrs. Gupta’s loan.

(c) The Sundry Creditors were paid off less 3% discount.

(d) The Realisation expenses incurred amounted to Rs 1,200.

Journalise the entries to be made on the dissolution and prepare Realisation Account, Bank Account and Partners Capital Accounts.

 

 

Answer:

 

Books of Gupta and Sharma   Journal
Date	Particulars			L.F.	Amount Rs	Amount Rs
2012
Dec. 31	Realisation A/c		Dr.		2,35,500
	To Sundry Debtors A/c					55,000
	To Stock A/c					44,000
	To Bills Receivable A/c					19,000
	To Machinery A/c					52,000
	To Investment A/c					38,500
	To Fixtures A/c					27,000
	(Assets transferred to Realisation Account)
Dec. 31	Sundry Creditors A/c		Dr.		38,000
	Mrs. Gupta’s Loan A/c		Dr.		20,000
	Mrs. Sharma’s Loan A/c		Dr.		30,000
	Provision for Doubtful Debts		Dr.		4,000
	To Realisation A/c					92,000
	(Liabilities transferred to Realisation Account)
Dec. 31	Bank A/c		Dr.		1,59,000
	To Realisation A/c					1,59,000
	(Assets realised: Sundry Debtors Rs 52,000, Stock Rs 42,000, Bills Receivable Rs 16,000, Machinery Rs 49,000)
Dec. 31	Realisation A/c		Dr.		20,000
	To Gupta’s Capital A/c					20,000
	(Gupta took over Mrs. Gupta's Loan)
Dec. 31	Gupta’s Capital A/c		Dr.		36,000
	To Realisation A/c					36,000
	(Investment taken over by Gupta)
Dec. 31	Realisation A/c		Dr.		66,860
	To Bank A/c					66,860
	(Liabilities paid: Mrs. Sharma's Loan Rs 30,000 and Creditors Rs 38,000 paid off less 3% discount)
Dec. 31	Realisation A/c		Dr.		1,200
	To Bank A/c					1,200
	(Realisation expenses paid)
Dec. 31	Gupta’s Capital A/c		Dr.		18,280
	Sharma’s Capital A/c		Dr.		18,280
	To Realisation A/c					36,560
	(Loss on Realisation transferred to Partners’ capital Account)
Dec. 31	Reserve Fund A/c		Dr.		6,000
	To Gupta’s Capital A/c					3,000
	To Sharma’s Capital A/c					3,000
	(Reserve fund distributed among partners ratio)
Dec. 31	Gupta’s Capital A/c		Dr.		58,720
	Sharma’s Capital A/c		Dr.		44,720
	To Bank A/c					1,03,440
	(Final payment made to partners)

 

Realisation Account
Dr.								Cr.
Particulars				Amount Rs	Particulars		Amount Rs
Sundry Debtors				55,000	Sundry Creditors		38,000
Stock				44,000	Mrs. Gupta’s Loan		20,000
Bills Receivable				19,000	Mrs. Sharma’s Loan		30,000
Machinery				52,000	Provision for Doubtful Debts		4,000
Investment				38,500	Bank :
Fixtures				27,000	Sundry Debtors	52,000
Gupta’s Capital A/c (Mrs. Gupta Loan)				20,000	Stock	42,000
Bank A/c:					Bills Receivable	16,000
Creditors			36,860		Machinery	49,000	1,59,000
Mrs. Sharma’s Loan			30,000		Gupta’s Capital A/c (Investment)		36,000
Expense			1,200	68,060	Loss transferred to
					Gupta’s Capital A/c	18,280
					Sharma’s Capital A/c	18,280	36,560
				3,23,560			3,23,560

 

Partners’ Capital Account
Dr.							Cr.
Particulars		Gupta	Sharma	Particulars	Gupta	Sharma
Realisation (Investment)		36,000		Balance b/d	90,000	60,000
Realisation (Loss)		18,280	18,280	Realisation (Mrs. Gupta Loan)	20,000
Bank		58,720	44,720	Reserve Fund	3,000	3,000
		1,13,000	63,000		1,13,000	63,000

 

Bank Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Balance b/d		12,500	Realisation	68,060
Realisation (Assets realised)		1,59,000	(Payment of expenses and liabilities)
			Gupta’s Capital A/c	58,720
			Sharma’s Capital A/c	44,720
		1,71,500		1,71,500

 

NOTE: As per the solution, the total of Bank Account is Rs 1,71,500. However, the answers for the same has not been mentioned in the book.

Question 19:

 

Ashok, Babu and Chetan are in partnership sharing profit in the proportion of 1/2, 1/3, 1/6 respectively. They dissolve the partnership of the December 31, 2017, when the balance sheet of the firm as under:

 

Balance Sheet of Ashok, Babu and Chetan as on December 31, 2017
Liabilities		Amount Rs	Assets	Amount Rs
Sundry Creditors		20,000	Bank	7,500
Bills payable		25,500	Sundry Debtors	58,000
Babu’s loan		30,000	Stock	39,500
Capital’s:			Machinery	48,000
Ashok	70,000		Investment	42,000
Babu	55,000		Freehold Property	50,500
Chetan	27,000	1,52,000
Current Accounts :
Ashok	10,000
Babu	5,000
Chetan	3,000	18,000
		2,45,500		2,45,500

 

The Machinery was taken over by Babu for Rs 45,000, Ashok took over the Investment for Rs 40,000 and Freehold property was taken over by Chetan at Rs 55,000. The remaining Assets realised as follows: Sundry Debtors Rs 56,500 and Stock Rs 36,500. Sundry Creditors were settled at discount of 7%. A Office computer, not shown in the books of Accounts realised Rs 9,000. Realisation expenses amounted to Rs 3,000.

Prepare Realisation Account, Partners Capital Account, Bank Account.

 

 

Answer:

 

 

Realisation Account
Dr.								Cr.
Particulars			Amount Rs	Particulars			Amount Rs
Sundry Debtors			58,000	Sundry Creditors			20,000
Stock			39,500	Bills Payable			25,500
Machinery			48,000	Ashok’s Current  A/c (Investment)			40,000
Investment			42,000	Babu’s Current  A/c (Machinery)			45,000
Freehold property			50,500	Chetan’s Current A/c			55,000
Bank:				(Free hold property)
Sundry Creditors		18,600		Bank:
Bills payable		25,500		Sundry Debtors		56,500
Expenses		3,000	47,100	Stock		36,500
Profit Transferred to				Unrecorded computer		9,000	1,02,000
Ashok’s Current A/c		1,200
Babu’s Current A/c		800
Chetan’s Current A/c		400	2,400
			2,87,500				2,87,500

 

Partners' Current Accounts
Dr.									Cr.
Particulars		Ashok	Babu	Chetan	Particulars	Ashok	Babu	Chetan
Realisation		40,000	45,000	55,000	Balance b/d	10,000	5,000	3,000
(Assets taken)					Realisation  (Profit)	1,200	800	400
					Ashok's Capital A/c	28,800
					Babu's Capital A/c		39200
					Chetan's Capital A/c			51600
		40,000	45,000	55,000		40,000	45,000	55,000

 

Partners' Capital Accounts
Dr.									Cr.
Particulars		Ashok	Babu	Chetan	Particulars	Ashok	Babu	Chetan
Ashok's Current		28,800			Balance b/d	70,000	55,000	27,000
Babu's Current			39200		Bank			24,600
Chetan's Current				51600
Bank		41,200	15,800
		70,000	55,000	51,600		70,000	55,000	51,600

 

Babu’s Loan A/c
Dr.					Cr.
Particulars		Amount	Particulars	Amount
Cash A/c		30,000	Balance b/d	30,000
		30,000		30,000

 

Bank Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Balance b/d		7,500	Realisation  (Payment of Expenses	47,100
Realisation  (Assets realised )		102,000	and Liabilities)
Chetan’s Capital A/c		24,600	Babu’s Loan	30,000
			Ashok’s Capital A/c	41,200
			Babu’s Capital A/c	15,800
		1,34,100		1,34,100

 

 

Question 20:

The following is the Balance sheet of Tanu and Manu, who shares profit and losses in the ratio of 5:3, On December 31,2017:

 

Balance Sheet of Tanu and Manu as on December 31, 2017
Liabilities		Amount Rs	Assets	Amount Rs
Sundry Creditors		62,000	Cash at Bank	16,000
Bills Payable		32,000	Sundry Debtors	55,000
Bank Loan		50,000	Stock	75,000
Reserve fund		16,000	Motor car	90,000
Capital:			Machinery	45,000
Tanu	1,10,000		Investment	70,000
Manu	90,000	2,00,000	Fixtures	9,000
		3,60,000		3,60,000

 

On the above date the firm is dissolved and the following agreement was made: Tanu agree to pay the bank loan and took away the sundry debtors. Sundry creditors accepts stock and paid Rs 10,000 to the firm. Machinery is taken over by Manu for Rs 40,000 and agreed to pay of bills payable at a discount of 5%.. Motor car was taken over by Tanu for Rs 60,000. Investment realised Rs 76,000 and fixtures Rs 4,000. The expenses of dissolution amounted to Rs 2,200.

Prepare Realisation Account, Bank Account and Partners Capital Accounts.

 

 

Answer:

 

Books of Tanu and Manu   Realisation Account
Dr.						Cr.
Particulars		Amount Rs	Particulars		Amount Rs
Sundry Debtors		55,000	Sundry Creditors		62,000
Stock		75,000	Bills Payable		32,000
Motor Car		90,000	Bank Loan		50,000
Machinery		45,000	Tanu’s Capital A/c:
Investment		70,000	Sundry Debtors	55,000
Fixtures		9,000	Motor Car	60,000	1,15,000
Manu’s Capital A/c  (Bills Payable)		30,400	Bank:
Bank  (Expenses)		2,200	Stock	10,000
Tanu's Capital A/c (Bank Loan)		50000	Investment	76,000
			Fixtures	4,000	90,000
			Manu’s Capital (Machinery)		40,000
			Loss transferred to
			Manu’s Capital A/c	23,500
			Manu’s Capital A/c	14,100	37,600
		4,26,600			4,26,600

 

Partners' Capital Account
Dr.							Cr.
Particulars		Tanu	Manu	Particulars	Tanu	Manu
Realisation (Assets taken)		1,15,000	40,000	Balance b/d	1,10,000	90,000
Realisation  (Loss)		23,500	14,100	Realisation  (Liabilities)	50,000	30,400
Bank		31,500	72,300	Reserve Fund	10,000	6,000
		1,70,000	1,26,400		1,70,000	1,26,400

 

 

Bank Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Balance b/d		16,000	Realisation (Expenses)	2,200
Realisation (Assets)		90,000	Tanu’s Capital A/c	31,500
			Manu’s Capital A/c	72,300
		1,06,000		1,06,000

 

 

NCERT Class 12 Accountancy (Not-for-Profit Organisation and Partnership Accounts)

Class 12 Accountancy Chapters | Accountancy Class 12 Chapter 5

NCERT Solutions For Class 12 Accountancy

Class 12 Accountancy NCERT Solutions: Not-for-Profit Organisation and Partnership Accounts

NCERT Solutions For Class 12 Accountancy Chapter 1 Accounting for Not-for-Profit Organisation
NCERT Solutions For Class 12 Accountancy Chapter 2 Accounting for Partnership : Basic Concepts
NCERT Solutions For Class 12 Accountancy Chapter 3 Reconstitution of a Partnership Firm – Admission of a Partner
NCERT Solutions For Class 12 Accountancy Chapter 4 Reconstitution of a Partnership Firm – Retirement/Death of a Partner
NCERT Solutions For Class 12 Accountancy Chapter 5 Dissolution of Partnership Firm

NCERT Solutions For Class 12 Accountancy

Class 12 Accountancy NCERT Solutions: Company Accounts and Analysis of Financial Statements

NCERT Solutions For Class 12 Accountancy Chapter 1 Accounting for Share Capital
NCERT Solutions For Class 12 Accountancy Chapter 2 Issue and Redemption of Debentures
NCERT Solutions For Class 12 Accountancy Chapter 3 Financial Statements of a Company
NCERT Solutions For Class 12 Accountancy Chapter 4 Analysis of Financial Statements
NCERT Solutions For Class 12 Accountancy Chapter 5 Accounting Ratios
NCERT Solutions For Class 12 Accountancy Chapter 6 Cash Flow Statement

NCERT Solutions for Class 12 All Subjects	NCERT Solutions for Class 10 All Subjects
NCERT Solutions for Class 11 All Subjects	NCERT Solutions for Class 9 All Subjects

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