Basis of Comparison	Dissolution of Partnership	Dissolution of Partnership firm
Meaning	It refers to the stage where a partner/partners discontinue their relationship with the firm.	It refers to the situation that all the relations between a firm and its partners cease to exit
Discontinuation	Business continues as usual	Discontinuation of business due to the dissolution of the firm
Accounts	A revaluation account is created	A realization account is created
Liabilities and assets	Revaluation is done	Sold off to pay for the liabilities
Economic Relationship	Continues	It comes to an end
Nature	Such type of event is voluntary in nature	It can sometimes be compulsory and sometimes voluntary
Effect	The firm is not dissolved	Both firm and partnership are dissolved

2. State the accounting treatment for:

i. Unrecorded assets

ii. Unrecorded liabilities

(i) For Unrecorded Assets

An unrecorded asset is such an asset whose value is written off from books of accounts, but it is in usable form. It is shown as follows:

1. If sold by cash

Cash A/c Dr.

To Realisation A/c

(Unrecorded asset sold off for cash)

2. If taken over by any partner

Partner’s Capital A/c Dr.

To Realisation A/c

(Partner takes over unrecorded asset)

ii) For unrecorded liabilities

Liabilities that are not recorded in the books of the firm are called unrecorded liabilities. It can be shown in records as

1. When unrecorded liability is paid off

Realisation A/c Dr.

To Cash A/c

(Paid in cash the price of unrecorded liability)

2. When undertaken by a partner

Realisation A/c Dr.

To Partner’s Capital A/c

(Liability that is unrecorded is taken over by partner)

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

(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)

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

Basis of Comparison	Firm’s Debts	Partner’s Private Debts
Meaning	Debts that are owed by a firm to the outsiders.	Debts that are owed by a partner to any other person outside the firm.
Liability	Liability of the firm’s debt lies with all the partners jointly as well as individually.	The liability of repaying debt rest only with the partner who has taken the debt.
Debt Settlement by private assets	Whenever the debts of the firm exceed the assets of the firm, the partner’s private assets may be utilized in order to pay the firm’s debt, only on the condition that the partner’s asset is more than his debts.	The debts that are private will be settled by the private assets of the partner. If any surplus happens, it will be used to pay for the firm’s debts.
Debt settlement by firm’s assets	Debts of the firm are settled using the assets of the firm. If any asset remains after clearing the debt, it gets distributed between the partners.	Partner can utilize their share of surplus assets obtained after clearing all debts from the firm for personal use.

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

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 this sequence:

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 must be paid off.

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

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

i. Adjust loss and capital deficiency against the profits of the firm

ii. Adjust against the total capital of the firm

iii. If any loss or deficiencies is present after all the adjustments, the next course of action will be to bear the loss as per the individual profit-sharing ratio.

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

Basis of Comparison	Realisation Account	Revaluation Account
Meaning	It is an account that is prepared to determine the net profit or loss on the sale of assets and discharging of liabilities of the firm	It is an account that is prepared to determine variations in the value of liabilities and assets of a firm.
Comprises of	All liabilities and assets	Only those liabilities and assets that are revaluated
Time of preparation	During the dissolution of the firm	During firm restructuring
Frequency of Preparation	One time, when the firm is dissolved.	As and when a new partner is introduced or an existing partner leaves the firm
Effect	All accounts related to liabilities and assets are closed	There is no account closure when revaluation happens
Records	Records all the liabilities and assets	Records liabilities and assets whose value changed over a period.

Long Questions for NCERT Solutions for Class 12 Accountancy Part 1 Chapter 5 Dissolution of Partnership Firm

1. Explain the process of dissolution of a partnership firm?

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.

2. What is a Realisation Account?

When a firm is dissolved, it results in the closing of all accounts, assets are sold off, and liabilities are paid off. To maintain a record of all such activities, a nominal account is prepared, which is called a Realisation Account. Its main purpose is to determine the profit or loss that happens due to settling off assets and liabilities. If this exercise results in profit or loss, it gets transferred to the Partners’ Capital Account with their original profit-sharing ratio.

The main objectives of preparing a realisation account are as follows:

1. To ensure all accounts are closed

2. To record all transactions that are related to sale of assets and paying off liabilities

3. Determining whether profit or loss is happening due to the sale of assets and paying off liabilities.

The format of a realisation account is as follows:

Format of Realisation Account
Dr.			Cr.
Particulars	Amount ₹	Particulars		Amount ₹
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)		– – – –
	–			–

3. Reproduce the format of Realisation Account.

 

Format of Realisation Account
Dr.			Cr.
Particulars	Amount ₹	Particulars		Amount ₹
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)		– – – –
	–			–

4. How is deficiency of creditors paid off?

A deficiency of creditors arises when a firm is unable to pay off the creditors after selling all the assets and utilising the partner’s private assets. In such a situation, there are two procedures that need to be followed:

1. Transferring deficiency to Partners’ Capital Account: In this procedure, creditors get paid from the cash available with the firm, which includes each partner’s individual contribution. The deficiency is transferred to the Partner’s capital account and therefore is managed by all partners as per their profit-sharing ratio. In case a partner becomes insolvent, it is regarded as a capital loss for the firm. If the partnership deed has no clause for such a situation, then the capital loss needs to be borne by partners who are in a solvent state and as per their capital ratio in the firm, as per Garner vs. Murray case.

2. Transferring the deficiency to Deficiency Account: In this process, a separate account is prepared for creditors. Then to determine the cash obtained from the sale of the firm’s and partners’ private assets, a cash account is prepared. Then after determining the cash available with the firm, creditors and external liabilities are paid, but not in full. The remaining creditors or the deficiency is then transferred to the deficiency account.

Numerical Questions for NCERT Solutions for Class 12 Accountancy Part 1 Chapter 5 Dissolution of Partnership Firm

1. Journalise the following transactions regarding Realisation expenses:

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

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

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

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

 

 

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)

2. Record necessary journal entries in the following cases:

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

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

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

 

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 investment worth ₹ 43,000 in their full settlement)
(b)	No Entry
	(Creditors ₹ 16,000 accepted Machinery ₹ 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 ₹ 90,000 accepted buildings worth ₹ 1,20,000 and returned ₹ 30,000 as cash after settlement of claim to the firm)

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

 

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)

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

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

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

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

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

 

Journal
	Particulars			L.F.	Amount ₹	Amount ₹
(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)

5. Give journal entries for the following transactions:

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

2. A Firm has a Stock of ₹ 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 Building (book value ₹ 1,60,000) sold for ₹ 3,00,000 through a broker who charged 2%, commission on the deal,

5. Plant and Machinery (book value ₹ 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 ₹ 4,000 was realised at 50%.

 

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 value of 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% commission paid to the broker)
5)	No entry
	(Plant and Machinery ₹ 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 ₹ 4,000 were realised at 50%)

 

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 ₹ 1, 00,000,

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

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

 

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 him for dissolution ₹ 70,000)

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

You are required to record the journal entries for Realisation of assets.

 

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 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)

8. Record necessary journal entries to record the following unrecorded liabilities and assets 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 ₹ 3,000,

2. Ashish, an old customer whose Account for ₹ 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 ₹ 30,000,

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

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

Books of Paras and Priya   Journal
	Particulars			L.F.	Amount ₹	Amount ₹
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 ₹ 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 ₹ 10 each which were not recorded in the books taken @ ₹ 6 each by Paras and Priya and divided between them in their profit sharing ratio)

9. All partners wish to dissolve the firm. Yastin, a partner wants that her loan of ₹ 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.

As per section 48 of the 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 ₹ 2, 00,000 must be paid off before the payment of the partners’ capital.

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 Realisation Account?

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

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

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

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

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

 

 

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)

 

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 ₹	Assets		Amount ₹
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 ₹ 4, 84,000. Creditors agreed to take ₹ 38,000. Cost of Realisation was ₹ 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 ₹ 10,000. There was a contingent liability in respect of outstanding electric bill of ₹ 5,000, Bill Receivable taken over by Rose at ₹ 33,000.

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

 

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.

 

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

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

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 ₹	Assets	Amount ₹
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 ₹ 8,000 and to pay Mrs. Surjit’s loan.

2. Other assets were realised as follows:

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

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

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

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

 

 

 

8
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

 

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 ₹	Assets	Amount ₹
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:

	₹
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 ₹ 4,100,

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

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

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

 

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

 

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 ₹	Assets	Amount ₹
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:

 

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

 

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

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

 

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

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 ₹	Assets	Amount ₹
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 ₹ 95,000 and Machinery and Furniture is take over by Harish at value of ₹ 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 ₹ 46,000, expenses of Realisation amounted to ₹ 3,000. Prepare necessary ledger Account.

 

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

 

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 ₹	Assets	Amount ₹
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 ₹ 72,000, Debtors ₹ 54,000, Furniture ₹ 18,000, Stock 90% of the book value, Investments ₹ 76,000 and Bills receivable ₹ 31,000. Expenses of Realisation amounted to ₹ 4,500.

Prepare Realisation Account, Capital Accounts and Cash Account

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

 

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 ₹	Assets	Amount ₹
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:

	₹
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 ₹ 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 ₹ 1,200.

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

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

 

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

Prepare Realisation Account, Partners Capital Account, and Bank Account.

 

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

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 ₹	Assets	Amount ₹
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 ₹ 10,000 to the firm. Machinery is taken over by Manu for ₹ 40,000 and agreed to pay of bills payable at a discount of 5%.. Motor car was taken over by Tanu for ₹ 60,000. Investment realised ₹ 76,000 and fixtures ₹ 4,000. The expenses of dissolution amounted to ₹ 2,200.

Prepare Realisation Account, Bank Account and Partners Capital Accounts.

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

Concepts covered in this chapter –