Ncert Solutions for Class 12 Accountancy Chapter 4 Dissolution of Partnership Firm

Class 12 accountancy chapter 4 exercise solutions: Accountancy Class 12 Chapter 4 questions and answers

Textbook	NCERT
Class	Class 12
Subject	Accountancy
Chapter	Chapter 4
Chapter Name	Dissolution of partnership firm class 12 solutions
Category	Ncert Solutions
Medium	English

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Short Answer Questions

Question 1: State the difference between dissolution of partnership and dissolution of partnership firm.

Answer 1: The difference between the Dissolution’ of Partnership and Dissolution of Partnership Firm is as follows.

Aspect	Dissolution of Partnership	Dissolution of Partnership Firm
Meaning	Refers to the termination of an existing partnership agreement among partners, leading to a reconstitution of the partnership.	Refers to the complete closure of the partnership firm, where the business ceases to exist.
Effect on Business Operations	The business continues with a new agreement or set of terms between the remaining partners.	The business operations cease entirely, and the firm is wound up.
Reason	May occur due to admission, retirement, death, or insolvency of a partner.	Occurs when the firm decides to close the business permanently.
Continuity	The partnership firm remains in existence but with a changed composition or terms.	The firm is dissolved, and its existence comes to an end.
Scope	Limited to changes in partnership terms or structure.	Involves liquidation of assets, settlement of liabilities, and distribution of remaining assets.
Legal Implication	A new partnership agreement is formed, but the firm continues as a legal entity.	The firm is legally dissolved, and its registration is canceled.

In essence:

Dissolution of partnership focuses on restructuring the partnership without ending the firm.

Dissolution of the firm entails the complete termination of the firm’s existence and activities.

Question 2: State the accounting treatment at the time of dissolution of a firm for:
i. Unrecorded assets ii. Unrecorded liabilities

Answer 2: 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)

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 will you deal with partner’s loan if it appears on the
(a) assets side of the balance sheet, (b) liabilities side of balance sheet.

Answer 3: (a) When a partner’s loan is on the asset side of the balance sheet, it means that the partner has borrowed some amount from the business and needs to pay back the same. In this instance, the loan amount gets transferred to the partners’ capital account. It is shown as follows:

Partner’s Capital A/c Dr.

To Partner’s Loan A/c

(Loan account of partner transferred to partner capital account)

(b) When a partner’s loan appears on the liabilities side of the balance sheet, it means that the partner has provided a loan to the business, and the business has to pay back the amount which it has got from the partner. The loan is paid in cash after fulfilling the payment of all external liabilities.

Partner’s Loan A/c Dr.

To Cash/Bank A/c

(Loan taken from partner paid in cash)

Question 4: Distinguish between firm’s debts and partner’s private debts.

Answer 4: The distinction between firm’s debts and partner’s private debts lies in their origin, liability, and settlement obligations. Here’s a detailed comparison:

Aspect	Firm’s Debts	Partner’s Private Debts
Definition	Debts incurred in the name of the partnership firm for business purposes.	Debts incurred by an individual partner for personal reasons or activities.
Liability	The firm, as a collective entity, is primarily responsible for paying these debts. Partners share liability jointly and severally.	The individual partner is solely responsible for the repayment of their private debts.
Assets for Settlement	Firm’s assets are used first to settle firm’s debts. Partners’ private assets may be used if the firm’s assets are insufficient.	Partner’s personal assets are used first to settle private debts. If insufficient, their share in the firm’s surplus can be used.
Priority in Settlement	Firm’s creditors have priority over firm’s assets. Partners’ creditors can claim only the partner’s share in the surplus after firm debts are settled.	Partner’s private creditors have priority over the partner’s personal assets. Firm creditors cannot claim personal assets unless firm assets are exhausted.
Purpose	Arise from business operations, like loans for working capital, purchases, or expansion.	Arise from personal activities, like loans for private expenses or investments.

Question 5: State the order of settlement of accounts on dissolution.

Answer 5: In case of dissolution of a firm, the firm ceases to conduct its business and has to settle its accounts. For this purpose, the disposes off all of its assets for repaying all the claims against it. In this scenario, it should be noted that, subject to agreement among the partners, the following rules which are provided in Section 48 of the Partnership Act, 1932 shall apply. As per the rules, the following order of settlement will be followed.

(i) Treatment of Losses

Note: Losses, including deficiencies of capital, shall be paid

• (a) First, out of profits,
• (b) Next, out of capital of partners, and
• (c) Lastly, if necessary, by the partners individually in their profits sharing ratio.

(ii) Application of Assets: The assets of a firm, which includes any sum contributed by the partners to fulfill deficiencies of capital, shall be applied in the following manner and order

• (a) In paying off the debts of the firm to the third parties;
• (b) In repaying all the partner proportionately the amount due to them from the firm for advances other than their respective capitals (i.e., partner’s loan);
• (c) In paying to each partner proportionately what is due to him on account of capital; and
• (d) The left our amount, if any, shall be divided among the partners in their profit sharing ratio. 

Question 6: On what account realisation account differs from revaluation account.

Answer 6: The Realisation Account and Revaluation Account are distinct accounting tools used in partnership accounting, differing primarily in their purpose and treatment of assets and liabilities. Here’s a comparison:

Aspect	Realisation Account	Revaluation Account
Purpose	Prepared at the time of dissolution of the firm to record the sale of assets and settlement of liabilities.	Prepared at the time of reconstitution of the firm to revalue assets and liabilities.
Stage of Use	Used during the dissolution of the partnership firm.	Used during reconstitution events like admission, retirement, or death of a partner.
Focus	Deals with the realization (sale) of assets and payment of liabilities.	Deals with the adjustment of the book values of assets and liabilities to reflect their current market values.
Entries	Records the actual proceeds from the sale of assets and the payment of liabilities.	Records changes (increase or decrease) in the values of assets and liabilities.
Profit or Loss	The balance (profit or loss on realization) is transferred to the partners’ capital accounts.	The revaluation profit or loss is distributed among existing partners in their old profit-sharing ratio.
Closure of Accounts	Leads to the closure of all accounts, including partners’ capital accounts, to dissolve the firm.	Does not lead to closure of the firm; only adjustments are made.
Example Transactions	Sale of fixed assets, payment of creditors, realization of investments.	Appreciation of land, depreciation of machinery, provision for doubtful debts.

Key Difference: The Realisation Account is used to wind up the firm’s operations, while the Revaluation Account is used to adjust the values of assets and liabilities during changes in the partnership structure.

Long Answer Questions

Question 1: Explain the process dissolution of partnership firm?

Answer 1: The dissolution of a partnership firm results in the business being discontinued. Dissolution consists of disposing of assets, clearing payment for liabilities and distributing the profit or loss among all partners.

A firm may be dissolved in the following ways:

1. Dissolution by agreement which can be with the consent of all partners or a contract between all partners.

2. Dissolution, which becomes compulsory when all partners become insolvent or any changes in government policies make the business illegal.

3. Dissolution that is based on certain conditions such as a fixed period, purpose, death of a partner or insolvency of a partner/partners.

4. Dissolution by a written notice given by a partner with the intention to dissolve the firm.

5. Dissolution by a court on account of a partner becoming lunatic, indulging in illegal activities, found guilty of misconduct, incapable of performing duties or dissolution reason found justified.

The following rules are applicable to the settlement of accounts after a firm is dissolute as per Section 48 of the Partnership Act, 1932.

1. Amount which is received on the sale of assets should be used in the following order

• i. Paying off all external expenses and liabilities
• ii. Loans and advances that are owed to partners should be cleared.
• iii. Capitals of all the partners should be paid off.

Any amount that still remains after paying off all these items should be distributed among partners of the dissolute firm in their original profit sharing ratio.

2. In case of loss and capital deficiency, the following should be paid in order:

• i. Adjust loss and capital deficiency against profits of firm.
• ii. Adjust against the total capital of the firm.
• iii. If there exists any loss or deficiencies after all the adjustments, the next course of action will be to bear the loss as per the individual profit-sharing ratio.

Question 2: What is a Realisation Account?

Answer 2: On dissolution of a firm, all the books of account are to be closed, all the assets are to be sold and all the liabilities are to be paid off. In order to record the sale of assets and discharge of liabilities, a nominal account is prepared and named as ‘realisation account’. The main reason 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 required to be transferred to the partner’s capital account in their profit sharing ratio.

Concisely, following are the key objectives of preparing a realisation account

• (i) To close all the books of account.
• (ii) To record transactions relating to the sale of assets and discharge of liabilities.
• (iii) To determine profit or loss due to the realisation of assets and liabilities.

Features of Realisation Account

• (i) In realisation account, sale of assets is supposed to be recorded at their realised value.
• (ii) Payment to liabilities (creditors) is recorded at their settlement value.
• (iii) Once all the transactions have been recorded, the remaining balance will be either profit or loss.
• (iv) Profit arises in two situations.
  • (a) When assets are realised at more than their book value.
  • (b) When liabilities are settled at less than their book value.
• (v) If the two conditions are vice versa, then the net result will be loss.
• (vi) The net profit or loss on realisation is the transferred to the partner’s capital accounts in their respective profit sharing ratio. 

Question 3: Reproduce the format of Realisation Account

Answer 3:

Particulars	Amount(₹)	Particulars	Amount(₹)
Assets	—	Liabilities	—
To Land and Building	—	By Sundry Creditors	—
To Plant and Machinery	—	By Bills Payables	—
To Furniture and Fitting	—	By Bank Overdraft	—
To Bills Receivables	—	By Outstanding Expenses	—
To Sundry Debtors	—	By Provision for Doubtful Debts	—
To Cash/Bank (Payment of Liabilities)	—	By Cash/Bank (Sales Proceed of Assets)	—
To Partner’s Capital A/c (Liability Assumed by the Partner)	—	By Partner’s Capital Account (Assets Taken by the Partner)	—
To Profit (Transferred to Partner’s Capital Account in their Profit Sharing Ratio)	—	By Loss (Transferred to Partners Capital Account)	—
Total	—	Total	—

Question 4: How deficiency of creditors is paid off at the time of dissolution of firm.

Answer 4: 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.

Numerical Type Questions

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 1:

Journal
	Particulars			L.F.	Amount₹	Amount₹
(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 2:

Journal
	Particulars			L.F.	Amount₹	Amount₹
(a)	Realisation A/c		Dr.		40,000
	To Cash A/c					40,000
	(Creditors worth ₹ 85,000 accepted 40,000 as cash and investmentworth ₹ 43,000 in their full settlement)
(b)	No Entry
	(Creditors ₹ 16,000 accepted Machinery ₹ 18,000 in the fullsettlement. No entry is required since both asset and liability arealready transferred to the Realisation Account)
(c)	Cash A/c		Dr.		30,000
	To Realisation A/c					30,000
	(Creditors worth ₹ 90,000 accepted buildings worth ₹ 1,20,000 andreturned ₹ 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 when the firm has been dissolved.

Answer 3:

Journal
Particulars		L.F.	Amount₹	Amount₹
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 over 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 4:

      Journal Entries

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

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 5:

Journal
	Particulars			L.F.	Amount₹	Amount₹
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 valueof the total stock  was ₹ 1,60,000)[1,60,000 × (50/100) × (80/100) = ₹ 64,000]
3)	Bank A/c		Dr.		1,04,000
	To Realisation A/c					1,04,000
	(Stock worth ₹ 80,000  sold at a profit of 30% on cost)[80,000 × (130/100 = ₹ 1,04,000)]
4)	Bank A/c		Dr.		2,94,000
	To Realisation A/c					2,94,000
	(Land and Building sold for ₹ 3,00,000 and 2% commissionpaid to the broker)
5)	No entry
	(Plant and Machinery ₹ 60,000 handed over to the creditors at adiscount of 10%.  No entry is required as both the asset and liabilityare already transferred to the Realisation Account)
6)	Bank A/c		Dr.		2,000
	To Realisation A/c					2,000
	(Investments worth ₹ 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 6:

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
	To Rashim’s Capital A/c					70,000
	(Realisation expenses borne by Rashim and remuneration to himfor dissolution ₹ 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 7:

Journal
Particulars			L.F.	Amount₹	Amount₹
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 ₹ 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 ₹ 20,000, i.e. 40% of assets of ₹ 50,000 are soldat a profit of 30%) [50,000 × (40/100) × (130/100)]
No entry is made for obsolescence of the assets and the assets givento the creditors in the full settlement as these are already transferred tothe 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 8:

Books of Paras and Priya
Journal Entries

	Particulars	L.F.	Amount (Rs.)	Amount (Rs.)
1)	Bank A/c                                  Dr.       To Realisation A/c (Unrecorded furniture sold)		3,000	3,000
2)	Bank A/c                          Dr.       To Realisation A/c (Bad Debt recovered which was previously written off as bad)		600	600
3)	Paras’s Capital A/c          Dr.       To Realisation A/c (Unrecorded goodwill taken over by Paras)		30,000	30,000
4)	Priya’s Capital A/c           Dr.       To Realisation A/c (Unrecorded Typewriter estimated Rs 400 taken over by Priya at 25% less price)		300	300
5)	Paras’s Capital A/c              Dr. Priya’s Capital A/c               Dr.       To Realisation A/c (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)		300 300	600

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 9: 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 of Arti and Karim 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 10:

Journal
	Particulars			L.F.	Amount₹	Amount₹
1	Arti’s Capital A/c		Dr.		68,000
	To Realisation A/c					68,000
	(Arti took over stock worth ₹ 80,000 at ₹ 68,000)
2.	Karim’s Capital A/c		Dr.		40,000
	To Realisation A/c					40,000
	(Karim took over an unrecorded bike of  ₹ 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 ₹ 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.)	Amount (Rs.)
Creditors	40,000	Cash		16,000
Lily’s loan	32,000	Debtors	80,000	76,400
Profit and Loss	50,000	Less: Provision for doubtful Debts	3600
Capitals:		Inventory		109,600
Lily	160,000	Bills Receivable		40,000
Rose	240,000	Buildings		280,000
	522,000			522,000

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 11:

Books of Rose and Lily Realisation Account
Dr.						Cr.
Particulars			Amount₹	Particulars		Amount₹
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₹	Particulars	Amount₹
Cash		32,000	Balance b/d	32,000
		32,000		32,000

Cash Account
Dr.							Cr.
Particulars			Amount₹	Particulars		Amount₹
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: Here the 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 debt	1,200
General Reserve	12,000
	190,200		190,200

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 12:

In the books of Shilpa, Meena and Nanda
Realisation Account
Dr.								Cr.
Particulars			Amount₹	Particulars			Amount₹
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₹	Particulars	Amount₹
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	Amt (Rs.)	Assets	Amt (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 13:

Books of Surjit and Rahi Realisation Account
Dr.						Cr.
Particulars			Amount₹	Particulars		Amount₹
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₹	Particulars	Amount₹
			Balance b/d	5,000
Bank		5,000
		5,000		5,000

Bank Account
Dr.						Cr.
Particulars		Amount₹	Particulars		Amount₹
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	Amt (Rs.)	Amt (Rs.)	Assets	Amt (Rs.)
Capitals:		160,000	Cash	22,500
Rita	80,000		Debtors	52,300
Geeta	50,000		Stock	36,000
Ashish	30,000		Investments	69,000
Creditors		65,000	Plant	91,200
Bills payable		26,000
General reserve		20,000
		271,000		271,000

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 Partner’s and Cash Account.

Answer 14:

In the books of Rita, Geeta and Ashish Realisation Account
Dr.								Cr.
Particulars				Amount₹	Particulars		Amount₹
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₹	Particulars	Amount₹
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

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	Amt (Rs.)	Amt (Rs.)	Assets	Amt (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 :		120,000	Stock	42,000
Anup	60,000		Leasehold land	60,000
Sumit	60,000		Furniture	25,000
		197,000		197,000

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 15:

Books of Anup and Sumit Realisation Account
Dr.							Cr.
Particulars			Amount₹	Particulars		Amount₹
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₹	Particulars	Amount₹
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	Amt (Rs.)	Amt (Rs.)	Assets	Amt (Rs.)
Capitals:		162,000	Building	80,000
Ashu	108,000		Machinery	70,000
Harish	54,000		Furniture	14,000
Creditors		88,000	Stock	20,000
Bank overdraft		50,000	Investments	60,000
			Debtors	48,000
			Cash in hand	8,000
		300,000		300,000

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 16:

Books of Ashu and Harish Realisation Account
Dr.						Cr.
Particulars			Amount₹	Particulars	Amount₹
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₹	Particulars	Amount₹
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

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
	₹ 1,43,000	₹ 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	Amt (Rs.)	Amt (Rs.)	Assets	Amt (Rs.)
Capitals:		270,000	Plant	90,000
Sanjay	100,000		Debtors	60,000
Tarun	100,000		Furniture	32,000
Vineet	70,000		Stock	60,000
Creditors		80,000	Investments	70,000
Bills payable		30,000	Bills receivable	36,000
			Cash in hand	32,000
		380,000		380,000

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 17:

Books of Sanjay, Tarun and Vineet Realisation Account
Dr.							Cr.
Particulars			Amount₹	Particulars		Amount₹
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₹	Particulars	Amount₹
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	Amt (Rs.)	Amt (Rs.)	Assets	Amt (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
			Investment	38,500
Capital :		150,000	Fixtures	27,000
Gupta	90,000
Sharma	60,000
		248,000		248,000

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
Fixtures	20,000

(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 18:

Books of Gupta and Sharma Journal
Date	Particulars			L.F.	Amount₹	Amount₹
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 ₹ 52,000, Stock ₹ 42,000,Bills Receivable ₹ 16,000, Machinery ₹ 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 ₹ 30,000 and Creditors₹ 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₹	Particulars		Amount₹
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₹	Particulars	Amount₹
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 `1,71,500. However the answer 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		Amt (Rs.)	Assets	Amt (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:		1,52,000	Machinery	48,000
Ashok	70,000		Investment	42,000
Babu	55,000		Freehold Property	50,500
Chetan	27,000
Current Accounts :		18,000
Ashok	10,000
Babu	5,000
Chetan	3,000
		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 19:

Realisation Account
Dr.								Cr.
Particulars			Amount₹	Particulars			Amount₹
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₹	Particulars	Amount₹
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	Amt (Rs.)	Amt (Rs.)	Assets	Amt (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 20:

Books of Tanu and Manu Realisation Account
Dr.						Cr.
Particulars		Amount₹	Particulars		Amount₹
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₹	Particulars	Amount₹
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