NCERT Solutions for Class 12 Accountancy Chapter 5 - Dissolution of Partnership Firm

Short Answer Type Questions

1. State the difference between dissolution of Partnership and Dissolution of Partnership firm.

Ans. The difference between the Dissolution’ of Partnership and Dissolution of Partnership Firm is given below:

Basis of Difference	Dissolution of Partnership	Dissolution of Partnership Firm
Meaning	It refers to change in the partnership deed (or the agreement) among the partners.	It states that the business is wound up and the firm is dissolved.
Discountinuatin of business	It does not affect the continuation of the business.	It affects the business the Firm is closed in this case.
Assets and liabilities	Assets and Liabilities are revalued and new balance sheet is prepared.	Assets are sold and realised. Liabilities are paid off.
Intervention by court	There is no intervention by the court.	Court has as inherent power to intervene by its order a firm can be dissolved.
Economic relationship	Economic relationship among the partners may remain the same or change	Economic relationship among partner comes to an end.
Closure of books of accounts	There is no need to close the books of accounts, as the business continues to operate.	All books of account are to be closed.

2. State the accounting treatment for :

(i) Unrecorded assets.

(ii) Unrecorded liabilities.

Ans. (i) Accounting Treatment for Unrecorded Assets : Unrecorded asset is an asset, which is not shown in
the books of accounts or which is written off in the books of accounts, but the asset is still available in physical form. Sometimes it is sold to a third party for cash and sometimes it is taken by the partner. The accounting treatment for such unrecorded assets will be done is accordance to the situation.

(a) When the unrecorded asset is sold for cash, the following Journal Entry will be there

(b) When the unrecorded asset is taken over by any partner the following Journal Entry will be there

date	Particulars	L.F.	Amount (₹) (Dr.).	Amount (₹) (Cr.)
	Cash A/c Dr.
	To Realisation A/c (Being unrecorded assets sold for cash)

date	Particulars	L.F.	Amount (₹) (Dr.).	Amount (₹) (Cr.)
	Partner’s Capital A/c Dr.
	To Realisation A/c (Being unrecorded assets taken over by the partner)

(ii) Accounting Treatment for Unrecorded Liabilities: Unrecorded liabilities are those liabilities, which are not shown in the books of accounts. But, at the time of dissolution, they are to be necessarily paid off. The following Journal Entry will be made as per situation.
(a) When the unrecorded liability is paid off the following Journal Entry will be there

date	Particulars	L.F.	Amount (₹) (Dr.).	Amount (₹) (Cr.)
	Realisation A/c Dr.
	To Cash A/c (Being unrecorded liability paid in cash)

(b) When the unrecorded liability is taken over by a partner. The following Journal Entry will be there

date	Particulars	L.F.	Amount (₹) (Dr.).	Amount (₹) (Cr.)
	Realisation A/c Dr.
	To Partner’s Capital A/c (Being unrecorded liability taken over by the partner)

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.

Ans. (a) When the loan amount is being reflected on the asset side of the balance sheet, it indicates that the loan was granted by the firm to the partner. In such a case, at the time of dissolution the amount of loan has to be transferred to the concerned partner’s capital account. The following Journal Entry will be passed

date	Particulars	L.F.	Amount (₹) (Dr.).	Amount (₹) (Cr.)
	Partner’s Capital A/c Dr.
	To Partner’s Loan A/c (Being partner’s loan amount is transferred to partner’s capital account)

(b) When the amount of loan is shown in the liabilities side of the balance sheet, it indicates that the respective partner or partners have advanced loan to the firm. In this such a case, partner’s loan will be paid off only after making payment of all external liabilities. Here, it is should be mentioned that the partner’s loan will not be transferred to the realisation account, in fact, it has to be paid in cash. The following accounting entry will be passed in this regard.

date	Particulars	L.F.	Amount (₹) (Dr.).	Amount (₹) (Cr.)
	Partner’s Loan A/c Dr.
	To Cash Bank A/c (Being loan taken from partner is paid in cash)

4. Distinguish between Firm’s Debts and Partner’s Private Debts.

Ans. The difference between Firm’s Debts and Partner’s Private Debts is as follows:

Basis of Difference	Firm’s Debts	Partner’s Private Debts
Meaning	Debts which are owed a firm to its outsders.	Debt owed by a partner to any other person.
Liability	All the partners are liable jointly and seperately to firm’s debt.	Only the concerned parther is should be held responsible to pay the liability.
Application of property	Firstly, firms debt will be repaid by the firms assets and if some unpaid debts are left, private assets will be utilised.	Partners personal assets will be utilised to set off the partners private debt.

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

Ans. 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.

6. On what account Realisation Account differs from Revaluation Account?

Ans. There are following difference between Realisation Account and Revaluation Account

Basis of Difference	Revaluation Account	Realisation Account
Meaning	The effect of revalution of assets and liabilities are recorded here.	The actual realisation of assets and settlement of all liabilities are recorded here.
Time of preparation	It has to be prepared at the time of admission, retirement and death of a partner.	It has to be prepared at the time of dissolution of a firm.
Item to be recorded	In this account only the items that cause change in the value of change of assets and liabilities are recorded.	In this account assets and liabilities are recorded.
Number of times	This may be prepared on a number of occasions throught the life of the firm.	This is prepared only once. i.e., at the time of dissolution of the firm.
Aim or objective	Its main objective is to make necessary adjustments and liabilities.	Its main objective is to determine the net profit/loss on realisation of assets and settlement of liabilities.

Long Answer Type Questions

1. Explain the process of dissolution of partnership firm.

Ans. Dissolution refers to breaking of relationship among the partners. As per Section 39 of the Indian Partnership Act 1932, the dissolution of firm implies that along with the dissolution of partnership, the firm also ceases to exits., i.e., after dissolution the firm does not remain in business.
Dissolution of a partnership firm implies discontinuation of business of the partnership firm. Dissolution involves winding up of business, disposal of assets and paying off the liabilities and distribution of any surplus or borne of loss by the partners of the firm. As per the Partnership Act 1932, a partnership firm may be dissolved in the following manners.

(i) Dissolution by Agreement: As a firm is formed with the consent of all partners with a mutual agreement. Dissolution can also be there with the help of a mutual agreement. It can take place in following two ways. A firm may be dissolved:

(a) With a mutual consent of all partners

(b) When there is any term related to dissolution of firm in the partnership agreement.

(ii) Compulsory Dissolution: A firm may be dissolved compulsorily in the following conditions:

(a) If all the partners or all except one partner become insolvent or insane.

(b) If the business becomes illegal.

(c) Where all the partners except one decide to retire from the firm.

(d) Where all the partners except one die.

(iii) Dissolution by Notice: When partnership is at will then the partnership firm can be dissolved, if any partner give a due notice in writing to all the other partners expressing his/her intention to dissolve the firm.

(iv) Dissolution by Court A court may order for dissolution if a suit is filed by a partner, as per Section 44 of Indian Partnership Act, 1932. The court has the power to dissolve a partnership in following conditions:

(a) A partner becomes insane.

(b) A partner commits breach of agreement wilfully.

(c) When a partner’s conduct affects the business.

(d) When a partner transfers his interest to a third party.

(e) If business cannot be continued.

(f) If a partner becomes incapable of doing business.

(g) If court thinks dissolution to be just and equitable on any ground.

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

2. What is a Realisation Account?

Ans. 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.

3. Reproduce the format of Realisation Account.

Ans.

Dr.	Format for Realisation Account		Cr.
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	--

4. How deficiency of creditors is paid off?

Ans. When a firm is to be dissolved, then first of all the amount received from the sale of firm’s assets are utilised to pay the creditors. Afterwards, if the sale receipts of assets fall short, then partners’ private assets will be 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 funds to be paid to creditors. This deficiency is handled in the following two ways:
(i) In first case, deficiency is transferred to a separate account called Deficiency Account.
(ii) In second case, the deficiency is transferred to the partner’s capital account.
In first case, a separate account is prepared for the firm’s creditors. Then in ‘ order to ascertain the firm’s cash balance accruing from selling the assets of the firm 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 second
case, the creditors are paid through the cash available with the firm including the partners’ individual contribution. The deficiency or unpaid creditors amount is then transferred to the partner’s capital account. Thus, the deficiency of the creditors is borne by all the partners in their respective profit sharing ratio. If any partner becomes insolvent and is unable to bear the deficiency, then this will be considered as a capital loss to the firm.
‘If the partnership deed is silent, about such capital loss with a given condition of insolvency of a partner, then such a deficiency on the insolvent partner’s capital ’ account must be borne by the other solvent partners, in proportion to their capital. In that case, we should apply Garner vs Murray decision in solving problems in partnership.

Numerical Type Questions

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.

Ans.

	Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Realisation A/c Dr.		2,500
	To Bank A/c (Being expenses on realsation paid)			2,500
(ii)	Realisation A/c Dr.		3,000
	To Ashok’s Capital A/c (Being expenses on realisation paid by Ashok)			3,000
(iii)	No entry will be passed as the expenses are borne personality by Tarun.		-	-
(iv)	Realisation A/c Dr.		4,000
	To Amit’s Capital A/c (Being expenses paid to Amit)			4,000

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 worth ₹16,000. They accepted Machinery valued at ₹18,000 in settlement of their claim.

(c) Creditors worth ₹90,000. They accepted Buildings valued ₹1,20,000 and paid cash to the firm ₹30,000.

Ans.

	Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Realisation A/c Dr.		40,000
	To Cash A/c (Being creditors worth ₹85,000 settled with ₹40,000 cash and investment worth ₹43,000)			40,000
(ii)	No entry will be passed as Liability is settled against asset without any cash/bank transaction.		--	--
(iii)	Cash A/c Dr.		3000
	To Realisation A/c (Being creditors worth ₹90,000 accepted building worth ₹1,20,000 and paid back ₹30,000 in cash to firm after settlement of their claim)			30,000

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 ₹3,000.

Journalise the transactions, supposing that the firm has been dissolved.

Ans.

	Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Nitin’s Capital A/c Dr.		3,000
	To Realisation A/c (Being creditors worth ₹90,000 accepted building worth ₹1,20,000 and paid back ₹30,000 in cash to firm after settlement of their claim)			30,000

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, respectively.

(d) An unrecorded asset realised for ₹ 5,500.

Ans.

	Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Realisation A/c Dr.		3,200
	To Bank A/c (Being unrecorded liabilities paid)			3,200
(ii)	Rohit’s Capital A/c Dr.		7,500
	To Realisation A/c (Being stock taken over by partner)			7,500
(iii)	Realisation A/c Dr.		18,000
	To Ashish’s Capital A/c			7,500
	To T arun’s Capital A/c (Being profit on realisation transferred to partner’s capital account)			10,500
(iv)	Bank A/c Dr.		5,500
	To Realisation A/c (Being unrecorded asset sold)			5,500

5. Give journal entries for the following transactions:

(i) To record the realisation of various assets and liabilities,

(ii) A Firm has a Stock of ₹1,60,000. Aziz, a partner took over 50% of the Stock at a discount of 20%,

(iii) Remaining Stock was sold at a profit of 30% on cost,

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

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

(vi) Investment whose face value was ₹4,000 was realised at 50%

Ans.

	Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
1(i)	For Transfer to Assets to Realisation Realisation A/c Dr		Book value
	To Assets A/c (Being assets transferred to realisation)
(ii)	For Transfer to Liabilities to Realisation Liabilities A/c (Separately) Dr		Book value
	To Realisation A/c (Being liabilities transferred to realisation)
(iii)	For Sale of Assets Cash/Bank A/c Dr.		Amount realised
(iv)	For Payment of Liabilities Realisation A/c Dr.		Actual value paid
	To Cash/Bank A/c (Being liabilities paid)
2	Aziz’s Capital A/c Dr.		64,000
	To Realisation A/c (Being 50% of stock taken over by partner Aziz at 20% discount)			64,000
3	Bank A/c Dr		1,04,000
	To Realisation A/c (Being 50% remaining stock worth ₹80,000 sold at 30% profit i.e., 24,000 + 80,000)			64,000
4	Bank A/c Dr.		2,94,000
	To Realisation A/c (Being land and building sold for `3,00,000 and paid 2% commission to broken out of it)			2,94,000
5	No entry will be passed as on cash/bank is involved.		-	-
6	Bank A/c Dr.		2,000
	To Realisation A/c (Being investments worth ₹4,000 realised at 50% of book value)			2,000

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

(i) Realisation expenses amounts to ₹1,00,000,

(ii) Realisation expenses amounting to ₹30,000 are paid by Rashim, a partner.

(iii) 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.

Ans.

	Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Realisation A/c Dr.		1,00,000
	To Bank A/c (Being expenses on realisation paid)			1,00,000
(ii)	Realisation A/c Dr		30,000
	To Rashim’s Capital A/c (Being expenses on realisation borne by Rashim)			30,000
(iii)	Realisation A/c Dr.		70,000
	To Rashim’s Capital A/c (Being expenses of realisation borne by Rashim and remuneration is fixed 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?

Ans.

	Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Realisation A/c Dr.		1,00,000
	To Sundry Assets A/c (Being assets transferred to realisation except cash/bank)			1,00,000
(ii)	Atul’s Capital A/c Dr.		40,000
	To Realisation A/c (Being 50% of asset worth `1,00,000 taken over by Atul of 20% discount)			40,000
(iii)	Bank A/c Dr.		26,000
	To Realisation A/c (Being 40% of remaining asset sold at profit of 30% on cost i.e., 20,000 + 6,000)			26,000
(iv)	No entry will be passed for 5% of remaining asset being absolute and remaining asset handed over to creditors in full setlement)

Note : As no information is given, hence profit sharing ratio for 5th entry is taken as equal.

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

(i) There was an old furniture in the firm which had been written-off completely in the books. This was sold for ₹3,000,

(ii) Ashish, an old customer whose account of ₹ 1,000 was written-off as bad in the previous year, paid 60%, of the amount,

(iii) Paras agreed to takeover the firm’s goodwill (not recorded in the books of the firm), at a valuation of ₹30,000,

(iv) 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%,

(v) 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.

Ans.

	Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Bank A/c Dr.		3,000
	To Realisation A/c (Being unrecorded furniture sold)			3,000
(ii)	Bank A/c Dr.		600
	To Realisation A/c (Being bad debts previously written off now recovered 60%)			600
(iii)	Paras’s Capital A/c Dr.		30,000
	To Realisation A/c (Being unrecorded goodwill taken over by a partner)			30,000
(iv)	Priya Capital A/c Dr.		300
	To Realisation A/c (Being unrecorded typewriter worth ₹ 400 taken over at 25% less by Priya)			300
(v)	Paras’s Capital A/c Dr.		300
	Priya’s Capital A/c Dr		300
	To Realisation A/c (Being 100 shares of 10 each unrecorded in the books taken @ ₹6 each by Paras and Priya in their profit sharing ratio)			600

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.

Ans. According to Section 48 of Partnership Act 1932, their is a prescribed sequence of preferences to be given which tells the priority of payment at the time of dissolution. In the above condition, the loans and advances of partner’s i.e., ₹2,00,000 will be paid first and only then the payment of capitals will be done.

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 Realisation account.

(i) Arti took over the Stock worth ₹80,000 at ₹68,000.

(ii) There was an unrecorded Bike of ₹40,000 which was taken over By Mr. Karim.

(iii) The firm paid ₹40,000 as compensation to employees.

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

(v) Loss on realisation ₹42,000 was to be distributed between Arti and Karim in the ratio of 3:4.

Ans.

	Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Arti’s Capital A/c Dr.		68,000
	To Realisation A/c (Being asset worth ₹80,000 taken over by Arti at ₹68,000)			68,000
(ii)	Karim’s Capital A/c Dr.		40,000
	To Realisation A/c (Being unrecorded bike worth ₹40,000 taken over by Karim)			40,000
(iii)	Realisation A/c Dr.		40,000
	To Bank A/c (Being compensation paid to employees)			40,000
(iv)	Realisation A/c Dr.		30,600
	To Bank A/c (Being creditors of ₹36,000 settled at discount of 15%)			30,600
(v)	Arti’s Capital A/c Dr.		18,000
	Karim’s Capital A/c Dr.		24,000
	To Realisation A/c (Being loss on realisation transferred to partner’s capital account in 3 : 4 ratio)			42,000

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	(–) Provision for
		Doubtful Debts (3,600)	76,400
Capital		Inventory	1,09,600
Lily	1,60,000	Bills Receivable	40,000
Rose	2,40,000	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) were realised for
₹4,84,000. Creditors agreed to take ₹38,000. Cost of realisation was ₹2400. There was a Motor Cycle in the firm which was brought out of the firm’s money, was not shown in the books of the firm. It was now sold for an amount of ₹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.

Ans.

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

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

Dr.	Realisation Account		Cr.
Particulars	Amount(₹)	Assets	Amount(₹)
To Cash	32,000	By Balance b/d	32,000
	32,000		32,000

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

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	23,000
Creditors	37,000	cash	10,840
Provision for Doubtful	1200
Debts
General Reserve	12,000
	1,90,200		1,90,200

The stock of value of ₹41,660 are taken over by Shilpa 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 was taken over by one of the Creditors at this value. Prepare the Realisation Account.

Ans.

Dr.	Realisation Account		Cr.
Particulars	Amount(₹)	Particulars	Amount(₹)
To Land	81,000	By Bank Loan	20,000
To Stock	56,760	By Creditors	37,000
To Debtors	18,600	By Provision for Doubtful Debts	1,200
To Shipla’s Capital A/c (Bank loan)	20,000	By Shilpa’s Capital A/c (Stock)	35,000
To Cash: Creditors 31,000		By Cash
Realisation Expenses 1,200	32,200	Stock 14,000
To Profit Transferred to		Debtors (8,000 + 4,300) 12,300
Shilpa’s Capital A/c 10,470		Land 1,10,000	1,36,300
Meena’s Capital A/c 6,980
Nanda’s Capital A/c 3,490	20,940
	2,29,500		2,29,500

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
Capitals		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:

(i) Surjit agreed to take the investments at ₹8,000 and to pay Mrs. Surjit’s loan.

(ii) Other assets were realised as follows:

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

(iii) Expenses on realisation amounted to ₹1,600.

(iv) Creditors agreed to accept ₹37,000 as a final settlement. You are required to prepare Realisation account, Partner’s Capital account and Bank account.

Ans.

Dr.	Realisation Account		Cr.
Particulars	Amount(₹)	Particulars	Amount(₹)
To Stock	6,000	By Creditors	38,000
To Debtors	19,000	By Mrs Surjit’s Loan	10,000
To Furniture	4,000	By Surjit’s Capital (Investment)	8,000
To Plant	28,000	By Bank
To Investment	10,000	Stock 5,000
To Surjit’s Capital A/c	10,000	Debtors 18,500
(Mrs Surjit’s Loan)		Furniture 4,500
To Bank		Plant 25,000	53,000
Expenses 1,600		By 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

Dr.	Partner’s Capital Account				Cr.
Particulars	Surjit	Rahi	Particulars	Surjit	Rahi
To Realisation (Investment)	8,000	-	By Balance b/d	10,000	8,000
To Realisation (Loss)	3,960	2,640	By Realisation (Mrs. Surjit Loan)	10,000
To Profit and Loss	4,500	3,000	By Reserve
To Bank (Balancing Figure)	12,540	8,360		9,000	6,000
	29,000	14,000		29,000	14,000

Dr.	Rahi’s Loan Account		Cr.
Particulars	Amount(₹)	Particulars	Amount(₹)
To Bank	5,000	By Balance b/d	5,000
	5,000		5,000

Dr.	Bank Account		Cr.
Particulars	Amount(₹)	Particulars	Amount(₹)
To Balance b/d	11,500	By Realisation (Creditors and Expenses)	38,600
To Realisation A/c (Assets Realised)	53,000	By Rahi’s Loan	5,000
		By Surjit’s Capital A/c	12,540
		By 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	Investment	69,000
Creditors	65,000	Plant	91,200
Bills Payable	26,000
General Reserve	20,000
	2,71,000		2,71,000

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

1. Rita was appointed to realise the assets. Rita was to receive 5% commission on the sale 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 materialised and paid off ₹9,800, Prepare Realisation account, Capital Accounts of Partners and Cash Account.

Ans.

Dr.	Realisation Account		Cr.
Particulars	Amount(₹)	Particulars	Amount(₹)
To Debtors	52,300	By Creditors	65,000
To Stock	36,000	By Bills Payable	26,000
To Investment	69,000	By Cash
To Plant	91,200	Debtors 30,000
To Cash		Stock 26,000
Outstanding Salaries 7,200		Plant 42,750
Discounted Bill 9,800		Investment 58,650	1,57,400
Creditors 65,000		By Loss Transferred to
Bills Payable 26,000	1,08,000	Rita’s Capital A/c 57,985
To Rita’s Capital A/c	7,870	Geeta’s Capital A/c 38,657
(Commission 1,57,400 × 5/100)		Ashish Capital A/c 19,328	1,15,970
	3,64,370		3,64,370

Dr.	Partner’s Capital Account						Cr.
Particulars	Rita	Geeta	Ashish	Particulars	Rita	Geeta	Ashish
To Balance (Loss)	57,985	38,657	19,328	By Balance b/d	80,000	50,000	30,000
To Bank (Balancing)Figure)	39,885	18,010	14,005	By General
				Reserve	10,000	6,667	3,333
				By Realisation (Commission)
	97,870	56,667	33,333		97,870	56,667	33,333

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

Note : No treatment will be done for expenses on realisation ₹4,100 as the firm has already paid 5% of assets realised as commission for dissolution to Rita ₹4,100 actual expense will be paid by Rita personally.

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

Balance Sheet of Anup and Sumit as on March 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	40,000	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 10,5000

The Creditors were paid ₹25,500 in full settlement. Expenses of realisation amount to ₹2,500. Prepare Realisation Account, Bank Account, Partners Capital Accounts to close the books of the firm.

Ans.

Dr.	Cash Account		Cr.
Particulars	Amount(₹)	Particulars	Amount(₹)
To Sundry Debtors	12,000	By Sundry Creditors	27,000
To Plants	47,000	By Loan	40,000
To Stock	42,000	By Bank
To Lease Hold Land	60,000	Lease Hold Land 72,000
To Furniture	25,000	Furniture 22,500
To Bank		Stock 40,500
Creditors 25,500		Plant 48,000
Loan 40,000		Sundry Debtors 10,500	1,93,500
Expenses 2,500	68,000
To Profit’s Transferred to
Anup’s Capital A/c 3,250
Sumit’s Capital A/c 3,250	6,500
	2,60,500		2,60,500

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

Dr.	Bank Account		Cr.
Particulars	Amount(₹)	Particulars	Amount(₹)
To Balance b/d	11,000	By Realisation (Expenses and Liabilities) A/c	68,000
To Realisation (Assets)	1,93,500	By Anup’s Capital A/c	68,250
		By 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 Anup and Sumit as on March 31, 2017
Liabilities	Amount(₹)	Assets	Amount(₹)
Capitals		Building	88,000
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 taken over by Harish at value of ₹80,000. Ashu agreed to pay the creditors and Harish agreed to meet Bank overdraft. Stock and Investments are taken by both the partners in profit sharing ratio. Debtors realised for ₹46,000, expenses of realisation amounted to ₹3,000. Prepare necessary ledger account.

Ans.

Dr.	Realisation Account		Cr.
Particulars	Amount(₹)	Particulars	Amount(₹)
To Building	80,000	By Creditors	88,000
To Machinery	70,000	By Bank Overdraft	50,000
To Furniture	14,000	By Ashu’s Capital A/c (Assets Taken) (95,000 + 48,000)	1,43,000
To Stock	20,000	By Harish’s Capital A/c (Assets Taken)	1,12,000
To Investment	60,000	To Cash (Debtors)	46,000
To Debtors	48,000
To Ashu’s Capital A/c (Creditors)	88,000
To Harish’s Capital A/c (Bank Overdraft)	50,000
To Cash (Expenses)	3,000
To 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

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

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

	Cash Account
Particulars	Amount(₹)	Particulars	Amount(₹)
To Balance b/d	8,000	By Realisation A/c (Eexpenses)	3,000
To Realisation A/c (Debtors)	46,000	By Ashu’s Capital A/c	56,600
To Harish’s Capital A/c	5,600
	59,600		59,600

	Balance Sheet of Sanjay, Tarun and Vineet as on March 31, 2017
Particulars	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 ₹1,000. Expenses of realisation amounted to ₹4,500. Prepare Realisation Account, Capital Accounts and Cash Account.

Ans.

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

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

	Books of Sanjay, Tarun and Vineet Realisation Account
Particulars	Dr.(₹)	Particulars	Cr.(₹)
To Balance b/d	32,000	By Realisation	1,10,000
To Realisation A/c	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 March 31,2017:

	Balance Sheet of Gupta and Sharma as on March 31, 2017
Particulars	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 asser realised and settlements of liabilities as follow:

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

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 ₹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.

Ans.

	Books of Gupta and Sharma Journal Entires
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
2017	Realisation A/c Dr.		2,35,500
Dec. 31	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 (Assets transferred to Realisation Account)			27,000
Dec.	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 (Liabilities transferred to Realisation Account)			92,000
Dec. 31	Bank A/c Dr.		1,79,000
	To Realisation A/c (Assets realised: Sundry Debtors ₹52,000, Stock ₹42,000, Bills Receivable Rs. 16,000, Machinery Rs. 49,000 fixtures 20,000)			1,79,000
Dec. 31	Realisation A/c Dr.		20,000
	To Gupta’s Capital A/c (Gupta took over Mrs. Gupta’s Loan)			20,000
Dec. 31	Gupta’s Capital A/c Dr.		36,000
	To Realisation A/c (Investment taken over by Gupta)			36,000
Dec. 31	Realisation A/c Dr.		66,860
	To Bank A/c (Liabilities paid. Mrs. Sharma’s Loan ₹30,000 and Creditors ₹38,000 paid off less 3% discount)			66,860
Dec. 31	Realisation A/c Dr.		1,200
	To Bank A/c (Realisation expenses paid)			1,200
Dec. 31	Gupta’s Capital A/c Dr.		8,280
	Sharma’s Capital A/c Dr.		8,280
	To Realisation A/c (Loss on Realisation transferred to Partners’ Capital Account)			36,560
Dec. 31	Reserve Fund A/c Dr.		6,000
	To Gupta’s Capital A/c			3,000
	To Sharma’s Capital A/c (Reserve fund distributed among partners ratio)		68,720
	Sharma’s Capital A/c		54,720
	To Bank A/c (Final payment made to partners)			1,03,440

	Realisation Account
Particulars	Amount(₹)	Assets	Amount(₹)
To Sundry Creditors	55,000	By Sundry Creditors	38,000
To Stock	44,000	To Mrs. Gupta’s Loan	20,000
To Bills Receivable	19,000	By Mrs. Sharma’s Loan	30,000
To Machinery	52,000	By Provision for Doubtful Debts	4,000
To Investment	38,500	By Bank:
To Fixtures	27,000	Sundry Debtors 52,000
To Gupta’s Capital A/c (Mrs. Gupta Loan)	20,000	Fixtures 42,000
To 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	By Bank 20,000
	By Loss transferred to	Gupta’s Capital A/c 8,280
		Sharma’s Capital A/c 8,280	16,560
	3,23,560		3,23,560

Dr.	Partners’ Capital Account				Cr.
Particulars	Gupta	Sharma	Particulars	Gupta	Sharma
To Realisation (Investment)	36,000		By Balance b/d	90,000	60,000
To Realisation (Loss)	8,280	8,280	By Realisation (Mrs. Gupta’s Loan)	20,000
To Bank	68,720	54,720	Reserve Fund	3,000	3,000
	1,13,000	63,000		1,13,000	63,000

	Bank Account
Particulars	Dr.(₹)	Particulars	Cr.(₹)
To Balance b/d0	12,500	By Realisation	68,060
To Realisation A/c (Assets realised)	1,59,000	(Payment of expenses and liabilities)	56,600
To Realisation A/c (fixtures)	20,000	By Gupta’s Capital A/c	68,750
		By Sharma’s Capital A/c	54,750
	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.

19. Ashok, Babu and Chetan are in partnership sharing profit in the proportion of

$$\frac{1}{2},\frac{1}{3},\frac{1}{6}\space respectively.$$

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:

Particulars	Amount(₹)	Assets	Amount(₹)
Sundry Creditors	20,000	Bank	7,500
Bills Payable	25,000	Sundry Debtors	58,000
Chetan’s Loan	30,000	Stock	39,500
Capital’s:		Machinery	48,000
Ashok 70,000		Investments	42,000
Babu 55,000		Freehold property	50,000
Chetan 27,000	1,52,000
Current accounts:
Ashok 10,000
Babu 5,000
Chetan 3,000
	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 took 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, Bank Account.

Ans.

	Realisation Account
Particulars	Amount(₹)	Assets	Amount(₹)
To Sundry Debtors	58,000	By Sundry Creditors	20,000
To Stock	39,500	By Bills Payable	25,500
To Machinery	48,000	By Ashok’s Current A/c (Investment)	40,000
To Investment	42,000	By Babu’s Current A/c (Machinery)	45,000
To Freehold Property	50,500	By Chetan’s Current A/c (Free hold property)	55,000
Sundry Creditors 18,600		By Bank
Bills payable 25,500		Sundry Debtors 56,500
Expense 3,000	47,100	Stock 36,500
To Profit Transferred to
Ashok’s Current A/c 1,200
Babu’s Current A/c 800
Babu’s Current A/c 800
	2,87,500		2,87,500

Dr.	Partner’s Capital Account						Cr.
Particulars	Ashok	Babu	Chetan	Particulars	Ashok	Babu	Chetan
To Realisation (Assets taken)	40,000	45,000	55,000	By Balance b/d	10,000	5,000	3,000
				By Realisation (profit)	1,200	800	400
				By Ashok’s Capital A/c	28,800
				By Babu’s Capital A/c		39,200
				By Chetan’s Capital A/c			51,600
	40,000	45,000	55,000		40,000	45,000	55,000

Dr.	Partner’s Capital Account						Cr.
Particulars	Ashok	Babu	Chetan	Particulars	Ashok	Babu	Chetan
To Realisation	28,800			By Balance b/d	70,000	55,000	27,000
To Babu’s Current		39,200		By Bank			24,600
To Chetan’s Current			51,600
To Bank	41,200	15,800
	70,000	55,000	51,600		70,000	55,000	51,600

	Babu’s Loan Account
Particulars	Dr.(₹)	Particulars	Cr.(₹)
To Bank A/c	30,000	By Balance b/d	30,000
	30,000		30,000

	Bank Account
Particulars	Dr.(₹)	Particulars	Cr.(₹)
To Balance b/d	7,500	By Realisation (Payment of Expenses)and Liabilities)	47,100
To Realisation A/c (Assets realised)	1,02,000
To Realisation A/c	24,600	By Babu’s Loan	30,000
		By Ashok’s Capital A/c	41,200
		By 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 March 31,2017: Balance Sheet of Tanu and Manu as on March 31, 2017

Balance Sheet of Anup and Sumit as on March 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
General Reserve	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.

Ans.

	Realisation Account
Particulars	Amount(₹)	Assets	Amount(₹)
To Sundry Debtors	55,000	By Sundry Creditors	62,000
To Stock	75,000	By Bills Payable	32,000
To Motor Car	90,000	By Loan	50,000
To Machinery	45,000	By Tanu’s Capital A/c
To Investment	70,000	Sundry Debtors 55,000
To Fixtures	9,000	Motor Car 60,000	1,15,000
To Manu’s Capital A/c (Bills Payable)	30,400	By Bank
To Bank (Expenses)	2,200	Stock 10,000
Tanu’s Capital A/c (Bank Loan)	50,000	Investment 76,000
		Fixtures 4,000	90,000
By 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

Dr.	Partners’ Capital Account				Cr.
Particulars	Tanu	Manu	Particulars	Tanu	Manu
To Realisation (Investment)	1,15,000	40,000	By Balance b/d	1,10,000	90,000
To Realisation (Loss)	23,500	14,100	By Realisation (Liabilities)	50,000	30,400
To 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
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	16,000	By Realisation (Expenses)	2,200
To Realisation A/c (Assets)	90,000	By Tanu’s Capital A/c	31,500
	24,600	By Manu’s Capital A/c	72,300
	1,06,000		1,06,000