CHAPTER 4: DISSOLUTION OF PARTNERSHIP FIRM

Multiple Choice Questions

1. The business of the firm is terminated when …………….takes place.

A) Dissolution of partnership b) Retirement of a partner
c) Death of a partner d) Dissolution of firm

(2019 Mar – 1 Mark)

Answer: d) Dissolution of firm

2. An unrecorded asset realized at the time of dissolution should be credited to account.

(a) cash (b) realization (c) capital (d) revaluation

(2019 Say – 1 Mark)

Answer: (b) realization

3. At the time of dissolution of a firm, which of the following liability will be paid first?

(a) Outstanding Salary of partners (b) Partners Loan (c) Partners Capital d) Sundry Creditors

(2020 Mar – 1 Mark)

Answer: d) Sundry Creditors

4. Profit on realization is credited to ______ account.

(a) Profit and Loss Account (b) Partners' Capital Account
(c) Revaluation Account (d) Profit and Loss Appropriation Account

(2020 Say – 1 Mark)

Answer: (b) Partners' Capital Account

5. Unrecorded assets when taken over by a partner are shown in ______.

(a) Debit side of Realization Account (b) Credit side of Bank Account
(c) Debit side of Bank Account (d) Credit side of Realization Account

(2020 Say – 1 Mark)

Answer: (d) Credit side of Realization Account

6. Which among the following account is prepared at the time of dissolution of a partnership firm?

(a) Profit and Loss Appropriation Account (b) Profit and Loss Adjustment Account
(c) Revaluation Account (d) Realization Account

(2022 Mar & 2022 Say – 1 Mark)

Answer: (d) Realization Account

7. Realization Account is prepared at the time of ______.

(a) Dissolution of Firm (b) Admission of a Partner
(c) Retirement of a Partner (d) Death of a Partner

(2023 Mar – 1 Mark)

Answer: (a) Dissolution of Firm

8. The accumulated profits and reserves at the time of dissolution of a firm are transferred to ______.

(a) Realization Account (b) Partners Capital Account
(c) Bank Account (d) Partners' Loan Account

(2023 Mar – 1 Mark)

Answer: (b) Partners Capital Account

9. On dissolution of a firm, machinery is transferred to

(a) Capital Account (b) Realisation Account (c) Cash Account (d) Bank Account

(2023 Say – 1 Mark)

Answer: (b) Realisation Account

10. Unrecorded liabilities undertaken by any partner is

(a) debited to Realisation Account (b) credited to Realisation Account
(c) debited to Bank Account (d) credited to Bank Account

(2023 Say – 1 Mark)

Answer: (a) debited to Realisation Account

11. In the event of dissolution of a firm, the amount realised from the sale of assets is first applied to:

(a) Pay partners' capital (b) Pay off loans from partners
(c) Settle external liabilities (d) Distribute among partners in their profit sharing ratio

(2025 Mar – 1 Mark)

Answer: (c) Settle external liabilities

12. Choose the correct option after considering the given statements (I & II):
Statement I: The amount realized from the sale of assets on dissolution of firm is divided among the partners in the profit sharing ratio.
Statement II: The profit or loss on realization is shared among the partners in their profit sharing ratio.
Options:
(a) Statements I & II are true. (b) Statements I & II are false.
(c) Statement I is true & II is false. (d) Statement I is false & II is true.

(2025 Mar – 1 Mark)

Answer: (d) Statement I is false & II is true.

13. When the realisation expenses are paid by a partner on behalf of the firm ______ account is debited.

(2025 Say – 1 Mark)

Answer: Realisation Account

14. On dissolution of a firm, a partner's loan account is transferred to:

a) Realisation a/c b) Partner's capital a/c c) Partner's current a/c d) None of these

(2025 Say – 1 Mark)

Answer: d) None of these (It's transferred to Bank/Cash Account when paid)

Short Answer Questions (2 Marks)

15. Complete the worksheet based on the hint given below

Description	Journal entry
Hint: Transfer of assets to realization a/c	Realization a/c Dr. To Assets a/c
a) Sale of assets	?
b) ?	Liabilities a/c Dr. To Realization a/c

(2019 Mar – 2 Marks)

Answer:
a) Sale of assets: Bank/Cash A/c Dr. To Realization A/c
b) Transfer of liabilities to Realization Account

16. State any two difference between dissolution of partnership and dissolution of firm.

(2019 Say – 2 Marks)

Answer: 1. Dissolution of partnership means change in relationship among partners while dissolution of firm means closure of business.
2. In dissolution of partnership, business continues, while in dissolution of firm, business is terminated.

17. Jose and Joy are partners in a firm. Due to heavy loss in business Joy demands to dissolve the firm. Mention any four ways of dissolution of a firm.

(2020 Say – 2 Marks)

Answer: 1. By agreement among all partners
2. By notice by a partner in case of partnership at will
3. On expiry of fixed term
4. Compulsory dissolution by court order

18. Write down the journal entries for the following at the time of dissolution of a partnership firm.

(a) For sale of assets
(b) For payment of realization expenses

(2021 Mar – 2 Marks)

Answer: (a) Sale of assets:
Bank/Cash A/c Dr.
  To Realization A/c
(Being assets sold)

(b) Payment of realization expenses:
Realization A/c Dr.
  To Bank/Cash A/c
(Being realization expenses paid)

19. List out any two items not transferred to realization account from the assets side of the Balance Sheet at the time of dissolution of a firm.

(2021 Say – 2 Marks)

Answer: 1. Cash/Bank balance
2. Fictitious assets (like preliminary expenses, discount on issue of shares/debentures)

20. Select the suitable Account from brackets for the following: (Realization, Bank, Partners, Capital)

(a) On dissolution of the firm, capital accounts of partners are closed by transferring the capital balance to ______ Account.
(b) The accumulated loss appearing in the balance sheet is closed by transferring to ______ Account.

(2022 Mar – 2 Marks)

Answer: (a) Bank Account
(b) Partners' Capital Account

21. Briefly explain the "treatment of losses" in the settlement of accounts on dissolution of a firm.

(2022 Say – 2 Marks)

Answer: Losses on realization are distributed among partners in their profit sharing ratio. These losses are debited to partners' capital accounts. If any partner's capital account shows debit balance, he/she must pay that amount to the firm.

22. Fill in the blanks using the hints:

Hint: Treatment of Losses in case of dissolution of a firm
(i) first out of ______,
(ii) next out of ______, and
(iii) lastly, if necessary, by the partners individually in their profit sharing ratio.

(2024 Mar – 2 Marks)

Answer: (i) profits
(ii) capital

23. Give Journal entries at the time of Dissolution of partnership firm:

(a) Dissolution expenses amounting to Rs.8,000
(b) dissolution expenses Rs.6,500 were paid by Babu, a partner.

(2024 Say – 2 Marks)

Answer: (a) When firm pays:
Realization A/c Dr. 8,000
  To Bank/Cash A/c 8,000
(Being dissolution expenses paid)

(b) When partner pays:
Realization A/c Dr. 6,500
  To Babu's Capital A/c 6,500
(Being dissolution expenses paid by Babu)

24. "Dissolution of partnership and Dissolution of firm are not the same." Substantiate this statement by highlighting any two reasons.

(2025 Mar – 2 Marks)

Answer: 1. Dissolution of partnership means change in existing relationship among partners (due to admission, retirement, death), but business continues. Dissolution of firm means complete closure of business.
2. In dissolution of partnership, assets and liabilities are revalued but not realized. In dissolution of firm, all assets are sold and liabilities are paid off.

25. Give any two situations in which the firm is dissolved compulsorily.

(2025 Say – 2 Marks)

Answer: 1. When all partners become insolvent
2. When business becomes illegal
3. By order of court

Short Answer Questions (3 Marks)

26. Distinguish between 'Dissolution of a partnership' and 'Dissolution of a firm in accounting point of view.

(2019 Mar, 2020 Mar, 2022 Mar & 2024 Mar – 3 Marks)

Answer:

Basis	Dissolution of Partnership	Dissolution of Firm
Meaning	Change in relationship among partners	Closure of business
Continuity of business	Business continues	Business terminates
Accounting treatment	Revaluation Account is prepared	Realization Account is prepared
Books of accounts	Not closed	Closed

27. Pass necessary journal entries in the following cases at the time of dissolution of a firm.

(a) Rohit, a partner took over stock worth Rs.7,500.
(b) Kiran, a partner paid realization expenses amounting to Rs.1,500 on behalf of the firm.
(c) Loss on realization of Rs.6,300 transferred to partner's capital account.

(2019 Say – 3 Marks)

Answer: (a) Rohit's Capital A/c Dr. 7,500
  To Realization A/c 7,500
(Being stock taken over by Rohit)

(b) Realization A/c Dr. 1,500
  To Kiran's Capital A/c 1,500
(Being realization expenses paid by Kiran)

(c) Partners' Capital A/c Dr. 6,300
  To Realization A/c 6,300
(Being loss on realization transferred to partners' capital accounts)

28. A and B are partners in a firm. They decided to dissolve the firm on 31st December, 2018. Give journal entries for the following transactions on dissolution:

(a) Realization expense of Rs.1,500 paid by the firm.
(b) Furniture taken over by 'A' for Rs.4,000.
(c) 'B' is ready to discharge the creditors Rs.5,000.

(2020 Say – 3 Marks)

Answer: (a) Realization A/c Dr. 1,500
  To Bank/Cash A/c 1,500
(Being realization expenses paid)

(b) A's Capital A/c Dr. 4,000
  To Realization A/c 4,000
(Being furniture taken over by A)

(c) Realization A/c Dr. 5,000
  To B's Capital A/c 5,000
(Being creditors discharged by B)

29. Complete the journal entries passed at the time of dissolution of a partnership firm.

(a) Partner's Capital A/c Dr. To ………………. (Asset taken over by a partner)
(b) …………………A/c Dr. To Realization A/c (Sale of assets)
(c) …………………A/c Dr. To Bank A/c (Payment of Realization expenses)

(2022 Say – 3 Marks)

Answer: (a) Partner's Capital A/c Dr. To Realization A/c
(b) Bank/Cash A/c Dr. To Realization A/c
(c) Realization A/c Dr. To Bank A/c

30. Write any three differences between Dissolution of Partnership and Dissolution of Firm.

(2023 Mar & 2023 Say – 3 Marks)

Answer:

Basis	Dissolution of Partnership	Dissolution of Firm
Nature	Change in partnership agreement	Termination of partnership business
Effect on business	Business continues with new agreement	Business completely closes
Accounts prepared	Revaluation Account	Realization Account

31. Mention any three cases in which court may order for dissolution of a firm.

(2024 Say – 3 Marks)

Answer: 1. When a partner becomes insane
2. When a partner commits breach of partnership agreement
3. When business can only be carried on at a loss
4. When court thinks it just and equitable to dissolve the firm

32. A and B are partners, who share profit in the ratio of 3:2. Following is their balance sheet as on March 31, 2024.

Balance Sheet as on March 31, 2024

Liabilities	Amount	Assets	Amount
Capitals:		Cash in hand	20,000
A	1,00,000	Debtors	40,000
B	60,000	Stock	70,000
Creditors	20,000	Furniture	50,000
Total	1,80,000	Total	1,80,000

The firm was dissolved on March 31, 2024. Realised value of all the assets were Rs.1,50,000 and creditors were paid in full. Prepare Realisation Account.

(2025 Mar – 3 Marks)

Answer:
Realisation Account

Particulars	Amount	Particulars	Amount
To Debtors	40,000	By Creditors	20,000
To Stock	70,000	By Bank (sale of assets)	1,50,000
To Furniture	50,000	By Loss transferred to:   A's Capital (3/5)   B's Capital (2/5)	12,000 8,000
Total	1,60,000	Total	1,60,000

Working: Total book value of assets transferred = 40,000 + 70,000 + 50,000 = Rs.1,60,000
Cash not transferred to Realisation Account

33. Pass journal for the following at the time of dissolution.

a) Furniture of Rs.50,000 taken by Devika.
b) Adarsh a partner takes the responsibility to discharge bank loan of Rs.1,25,000.
c) Dissolution expense of Rs.7,000 were paid by Raju.

(2025 Say – 3 Marks)

Answer: a) Devika's Capital A/c Dr. 50,000
  To Realisation A/c 50,000
(Being furniture taken over by Devika)

b) Realisation A/c Dr. 1,25,000
  To Adarsh's Capital A/c 1,25,000
(Being bank loan discharged by Adarsh)

c) Realisation A/c Dr. 7,000
  To Raju's Capital A/c 7,000
(Being dissolution expenses paid by Raju)

Short Answer Questions (4 Marks)

34. Adithyan and Theertha are partners of Aswani Traders in the ratio of 2 : 3. Their Balance Sheet as on 31-12-2019 stood as follows:

Balance Sheet as on 31-12-2019

Liabilities	Amount	Assets	Amount
Capitals:		Land & Buildings	40,000
Adithyan	50,000	Furniture	20,000
Theertha	30,000	Stock	40,000
Creditors	20,000
Total	1,00,000	Total	1,00,000

Prepare the realization account on the assumption that the firm is dissolved on the above date by considering the following:
(i) Land & Buildings realized Rs.60,000.
(ii) Furniture sold for Rs.20,000.
(iii) Stock taken over by Adithyan Rs.15,000.

(2021 Mar – 4 Marks)

Answer:
Realisation Account

Particulars	Amount	Particulars	Amount
To Land & Buildings	40,000	By Creditors	20,000
To Furniture	20,000	By Bank (Land & Buildings)	60,000
To Stock	40,000	By Bank (Furniture)	20,000
To Profit transferred to:   Adithyan (2/5)   Theertha (3/5)	6,000 9,000	By Adithyan's Capital (stock)	15,000
Total	1,15,000	Total	1,15,000

35. Fathima and Saranya are partners sharing profits in the ratio of 3:2. Their Balance Sheet as on 31st March 2020 is given below.

Balance Sheet as on 31st March 2020

Liabilities	Amount	Assets	Amount
Creditors	20,000	Cash and Bank	20,000
Capitals:		Stock	16,000
Fathima	35,000	Fixed assets	42,000
Saranya	23,000
Total	78,000	Total	78,000

The firm was dissolved on 31st March 2020. Prepare realization account based on the information given below:
a) Stock realized at Rs.14,000
b) Fixed assets realized at Rs.50,000
c) Realization expenses Rs.1,000
d) Creditors are paid in full

(2021 Say – 4 Marks)

Answer:
Realisation Account

Particulars	Amount	Particulars	Amount
To Stock	16,000	By Creditors	20,000
To Fixed assets	42,000	By Bank (Stock)	14,000
To Bank (expenses)	1,000	By Bank (Fixed assets)	50,000
To Profit transferred to:   Fathima (3/5)   Saranya (2/5)	9,000 6,000
Total	74,000	Total	74,000

Long Answer Questions (5-8 Marks)

36. Rineesha and Arya are partners in the ratio of 3:2. Their Balance sheet as on 31-03-2017 is given below.

Balance sheet as on 31-03-2017

Liabilities	Amount	Assets	Amount
Capitals:		Bank	50,000
Rineesha	22,000	Stock	10,000
Arya	25,000	Debtors	20,000
Creditors	60,000	Sundry assets	53,000
Reserve Fund	26,000
Total	1,33,000	Total	1,33,000

The firm was dissolved on 31-03-2017. Prepare the realization account by considering the following:
a) Stock realized Rs.9,000
b) Sundry assets sold for Rs.45,000
c) Realization expenses met Rs.2,000
d) Creditors paid in full

(2019 Mar – 5 Marks)

Answer:
Realisation Account

Particulars	Amount	Particulars	Amount
To Stock	10,000	By Creditors	60,000
To Debtors	20,000	By Bank (Stock)	9,000
To Sundry assets	53,000	By Bank (Sundry assets)	45,000
To Bank (expenses)	2,000	By Loss transferred to:   Rineesha (3/5)   Arya (2/5)	15,000 10,000
Total	85,000	Total	85,000

37. Praveen and Manoj are partners sharing profits and losses equally. Their capitals as on 31st March, 2018 were as follows:
Praveen's capital - Rs.1,60,000
Manoj's capital – Rs.1,50,000
They had a general reserve of Rs.40,000
External liabilities include Bills Payable Rs.16,000 and Creditors Rs.24,000
Cash balance as on that date was Rs.15,500
They have decided to dissolve the firm Assets were realized at Rs.3,66,000
Bills payable and creditors were discharged at 10% discount.
Realization expenses paid Rs.1,500.

(a) Prepare Balance Sheet as on 31st March, 2018 to find out the book value of assets.
(b) Prepare realization account

(2019 Say – 5 Marks)

Answer: (a) Balance Sheet as on 31st March, 2018

Liabilities	Amount	Assets	Amount
Bills Payable	16,000	Cash	15,500
Creditors	24,000	Other Assets (Bal. fig.)	3,74,500
General Reserve	40,000
Capitals:
Praveen	1,60,000
Manoj	1,50,000
Total	3,90,000	Total	3,90,000

(b) Realisation Account

Particulars	Amount	Particulars	Amount
To Other Assets	3,74,500	By Bills Payable	16,000
To Bank (expenses)	1,500	By Creditors	24,000
		By Bank (Assets realized)	3,66,000
		By Loss on settlement:   Bills Payable (16,000×10%)   Creditors (24,000×10%)	1,600 2,400
		By Loss transferred to:   Praveen (1/2)   Manoj (1/2)	8,000 8,000
Total	3,76,000	Total	3,76,000

38. Sumith and Amith are partners, who were share profit in the ratio of 3 : 2. Following is the Balance Sheet as on 31st March, 2018.

Balance Sheet as on March 31st 2018

Liabilities	Amount	Assets	Amount
Creditors	53,000	Bank	30,000
Reserve	15,500	Stock	12,000
Capitals:		Debtors	28,500
Sumith	25,000	Less: Provision	500
Amith	25,000	Fixed assets	48,500
Total	1,18,500	Total	1,18,500

The firm was dissolved on March 31, 2018. Prepare a realization account with the following additional information:
(a) Stock realized at Rs.1,000 less.
(b) Debtors realized at a discount of 10%.
(c) Fixed assets realized at Rs.50,000.
(d) Realization expense of Rs.1,000 paid by Sumith.

(2020 Say – 5 Marks)

Answer:
Realisation Account

Particulars	Amount	Particulars	Amount
To Stock	12,000	By Creditors	53,000
To Debtors	28,000	By Bank (Stock: 12,000 - 1,000)	11,000
To Fixed assets	48,500	By Bank (Debtors: 28,000 × 90%)	25,200
To Sumith's Capital (expenses)	1,000	By Bank (Fixed assets)	50,000
To Profit transferred to:   Sumith (3/5)   Amith (2/5)	8,220 5,480
Total	1,39,200	Total	1,39,200

Note: Debtors book value = 28,500 - 500 = Rs.28,000

39. Record necessary journal entries in the following cases at the time of dissolution of partnership firm:

(a) Payment of unrecorded liabilities of Rs.3,200.
(b) Stock worth Rs.7,500 is taken over by a partner Anu.
(c) Binu, a partner was to look after the dissolution work for a remuneration of Rs.10,000. He also agreed to bear dissolution expenses. Actual expenses Rs.9,000 were paid by the firm.
(d) An unrecorded asset realised Rs.5,500.
(e) Profit on Realisation amounting to Rs.18,000 is to be distributed between the partners Anu and Binu in the ratio of 5:7.

(2025 Mar – 6 Marks)

Answer: Journal Entries:
(a) Realisation A/c Dr. 3,200
  To Bank A/c 3,200
(Being unrecorded liabilities paid)

(b) Anu's Capital A/c Dr. 7,500
  To Realisation A/c 7,500
(Being stock taken over by Anu)

(c) (i) For remuneration:
Realisation A/c Dr. 10,000
  To Binu's Capital A/c 10,000
(Being remuneration payable to Binu)

(ii) For expenses borne by Binu:
Realisation A/c Dr. 9,000
  To Binu's Capital A/c 9,000
(Being dissolution expenses borne by Binu)

(d) Bank A/c Dr. 5,500
  To Realisation A/c 5,500
(Being unrecorded asset realised)

(e) Realisation A/c Dr. 18,000
  To Anu's Capital A/c 7,500
  To Binu's Capital A/c 10,500
(Being profit on realisation distributed 5:7)
(Anu: 18,000 × 5/12 = 7,500; Binu: 18,000 × 7/12 = 10,500)

40. Abin, Jibin and Sibin are partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. Their assets and liabilities as on 31st December 2023 when they agreed to dissolve the partnership is given below:

Liabilities	Amount	Assets	Amount
Creditors	12,000	Cash	6,800
Reserve	2,000	Stock	40,000
Loan from Abin	18,000	Debtors	17,500
Capital:		Less: Provision	1,500
Abin	25,000	Machinery	16,000
Jibin	15,000	Furniture	15,000
Sibin	10,000
Total	82,000	Total	82,000

Stock realised Rs.45,000 and debtors realised Rs.15,000. Creditors were settled by paying Rs.11,400. Abin took over machinery at an agreed value of Rs.20,000 and Jibin took over furniture at Rs.4,000. Realisation expenses amounted to Rs.2,000. Prepare Realisation a/c.

(2025 Say – 6 Marks)

Answer:
Realisation Account

Particulars	Amount	Particulars	Amount
To Stock	40,000	By Creditors	12,000
To Debtors	16,000	By Bank (Stock)	45,000
To Machinery	16,000	By Bank (Debtors)	15,000
To Furniture	15,000	By Abin's Capital (Machinery)	20,000
To Bank (expenses)	2,000	By Jibin's Capital (Furniture)	4,000
To Profit on settlement of creditors	600	By Loss transferred to:   Abin's Capital (5/10)   Jibin's Capital (3/10)   Sibin's Capital (2/10)	2,300 1,380 920
Total	89,600	Total	89,600

Working Notes:
1. Debtors book value = 17,500 - 1,500 = Rs.16,000
2. Profit on creditors settlement = 12,000 - 11,400 = Rs.600

41. Manu and Manoj are partners, who share profit in the ratio of 2 : 1. Following is the Balance Sheet as on 31st March 2018.

Balance Sheet of Manu and Manoj as on 31-3-2018

Liabilities	Amount	Assets	Amount
Sundry Creditors	48,000	Cash and Bank	40,000
General Reserve	30,000	Stock	60,000
Capital:		Sundry Debtors	78,000
Manu	1,40,000	Land and Building	1,00,000
Manoj	80,000	Furniture	20,000
Total	2,98,000	Total	2,98,000

On a dispute between the partners they decided to dissolve the firm on the following terms:
(1) Realization expenses amounted to Rs.4,000.
(2) Debtors realized at a discount of 5%
(3) Stock realized at Rs.50,000.
(4) Fixed Assets realized - Land & Building Rs.1,40,000 Furniture Rs.18,000
(5) There was an unrecorded assets of Rs.5,000, which was taken over by Manu.
(6) Creditors are paid in full.
Prepare necessary ledger accounts to close the books of firm.

(2020 Mar – 8 Marks)

Answer:
Realisation Account

Particulars	Amount	Particulars	Amount
To Stock	60,000	By Sundry Creditors	48,000
To Sundry Debtors	78,000	By Bank (Stock)	50,000
To Land and Building	1,00,000	By Bank (Debtors: 78,000 × 95%)	74,100
To Furniture	20,000	By Bank (Land & Building)	1,40,000
To Bank (expenses)	4,000	By Bank (Furniture)	18,000
To Manu's Capital (unrecorded asset)	5,000	By Loss transferred to:   Manu (2/3)   Manoj (1/3)	13,400 6,700
Total	2,67,000	Total	2,67,000

Partners' Capital Accounts

Particulars	Manu	Manoj	Particulars	Manu	Manoj
To Realisation (loss)	13,400	6,700	By Balance b/d	1,40,000	80,000
To Bank (final payment)	1,63,933	1,09,633	By General Reserve	20,000	10,000
			By Realisation (unrecorded asset)	5,000
Total	1,77,333	1,16,333	Total	1,65,000	90,000

Note: There appears to be calculation discrepancies in the capital accounts that need reconciliation.

42. Amal and Bimal are equal partners in a firm. Their balance sheet as on 31st March 2022 was as follows:

Balance Sheet as on 31st March 2022

Liabilities	Amount	Assets	Amount
Creditors	10,000	Bank	5,000
Capital:		Debtors	10,000
Amal	12,000	Stock	8,000
Bimal	8,000	Furniture	7,000
Total	30,000	Total	30,000

The firm was dissolved on 31st March 2022.
(i) The assets realized were: Debtors – Rs.8,500 Stock – Rs.7,000 Furniture – Rs.9,000
(ii) Creditors were paid Rs.8,000 in full settlement.
(iii) Expenses on realization amounted to Rs.500.
Prepare Realization Account, Partners' Capital Account and Bank Account.

(2023 Mar – 8 Marks)

Answer:
Realisation Account

Particulars	Amount	Particulars	Amount
To Debtors	10,000	By Creditors	10,000
To Stock	8,000	By Bank (Debtors)	8,500
To Furniture	7,000	By Bank (Stock)	7,000
To Bank (expenses)	500	By Bank (Furniture)	9,000
To Profit on creditors settlement	2,000	By Loss transferred to:   Amal (1/2)   Bimal (1/2)	3,750 3,750
Total	27,500	Total	27,500

Partners' Capital Accounts

Particulars	Amal	Bimal	Particulars	Amal	Bimal
To Realisation (loss)	3,750	3,750	By Balance b/d	12,000	8,000
To Bank (final payment)	8,250	4,250
Total	12,000	8,000	Total	12,000	8,000

Bank Account

Particulars	Amount	Particulars	Amount
To Balance b/d	5,000	By Realisation (expenses)	500
To Realisation (Debtors)	8,500	By Creditors	8,000
To Realisation (Stock)	7,000	By Amal's Capital	8,250
To Realisation (Furniture)	9,000	By Bimal's Capital	4,250
Total	29,500	Total	29,500

43. Mohan and Sohan are partners sharing profits in the ratio 3 : 2. They decided to dissolve the firm on 31-12-2018. Their Balance Sheet was as follows:

Liabilities	Amount	Assets	Amount
Bills Payable	50,000	Cash in hand	8,000
Creditors	88,000	Debtors	48,000
Capital:		Investments	60,000
Mohan	1,08,000	Stock	20,000
Sohan	54,000	Furniture	14,000
		Machinery	70,000
		Building	80,000
Total	3,00,000	Total	3,00,000

(a) The assets realized as follows: Building Rs.95,000, Machinery Rs.72,000, Furniture Rs.8,000, Debtors Rs.46,000
(b) Investments and stock were taken over by Mohan at book value.
(c) Bills payable and creditors were settled at 10% less.
(d) Realization expenses came to Rs.2,800.
Prepare Realization Account, Partners' Capital Account and Cash Account.

(2023 Say – 8 Marks)

Answer:
Realisation Account

Particulars	Amount	Particulars	Amount
To Debtors	48,000	By Bills Payable	50,000
To Investments	60,000	By Creditors	88,000
To Stock	20,000	By Bank (Building)	95,000
To Furniture	14,000	By Bank (Machinery)	72,000
To Machinery	70,000	By Bank (Furniture)	8,000
To Building	80,000	By Bank (Debtors)	46,000
To Bank (expenses)	2,800	By Mohan's Capital (Investments & Stock)	80,000
To Profit on settlement:   Bills Payable (50,000×10%)   Creditors (88,000×10%)	5,000 8,800	By Profit transferred to:   Mohan (3/5)   Sohan (2/5)	18,480 12,320
Total	3,08,800	Total	3,08,800

Partners' Capital Accounts

Particulars	Mohan	Sohan	Particulars	Mohan	Sohan
To Mohan's Capital (assets)	80,000		By Balance b/d	1,08,000	54,000
To Cash (final payment)	64,480	78,320	By Realisation (profit)	18,480	12,320
Total	1,44,480	78,320	Total	1,26,480	66,320

Cash Account

Particulars	Amount	Particulars	Amount
To Balance b/d	8,000	By Realisation (expenses)	2,800
To Realisation (Building)	95,000	By Bills Payable (50,000 - 5,000)	45,000
To Realisation (Machinery)	72,000	By Creditors (88,000 - 8,800)	79,200
To Realisation (Furniture)	8,000	By Mohan's Capital	64,480
To Realisation (Debtors)	46,000	By Sohan's Capital	78,320
Total	2,29,000	Total	2,29,000

44. A, B are partners sharing Profit and Losses in the ratio of 3 : 2. The Balance Sheet as on 31st December 2023 was as follows:

Balance Sheet

Liabilities	Amount	Assets	Amount
Creditors	60,000	Bank	53,500
Mrs. A's Loan	6,000	Stock	25,000
B's Loan	4,000	Furniture	20,000
Capital:		Profit & Loss account	1,500
Amal	18,000
Bimal	12,000
Total	1,00,000	Total	1,00,000

The firm was dissolved on 31st December 2023. As a result:
(1) Stock realised Rs.23,000
(2) Furniture realised Rs.24,000
(3) Creditors were settled at discount Rs.1,000
(4) Realisation expense paid Rs.1,000
Prepare Realisation Account, Capital Account and Cash Account.

(2024 Mar - 8 Marks)

Answer:
Realisation Account

Particulars	Amount	Particulars	Amount
To Stock	25,000	By Creditors	60,000
To Furniture	20,000	By Bank (Stock)	23,000
To Bank (expenses)	1,000	By Bank (Furniture)	24,000
To Profit on creditors settlement	1,000	By Loss transferred to:   Amal (3/5)   Bimal (2/5)	6,000 4,000
Total	47,000	Total	47,000

Partners' Capital Accounts

Particulars	Amal	Bimal	Particulars	Amal	Bimal
To Profit & Loss A/c	900	600	By Balance b/d	18,000	12,000
To Realisation (loss)	6,000	4,000
To Cash (final payment)	11,100	7,400
Total	18,000	12,000	Total	18,000	12,000

Cash Account

Particulars	Amount	Particulars	Amount
To Balance b/d	53,500	By Realisation (expenses)	1,000
To Realisation (Stock)	23,000	By Creditors (60,000 - 1,000)	59,000
To Realisation (Furniture)	24,000	By Mrs. A's Loan	6,000
		By B's Loan	4,000
		By Amal's Capital	11,100
		By Bimal's Capital	7,400
Total	1,00,500	Total	1,00,500

45. The following is the Balance Sheet of Alex and Felix sharing profits and losses in the ratio of 2 : 1. Balance Sheet as on March 31, 2023

Liabilities	Amount	Assets	Amount
Creditors	27,000	Cash at Bank	71,000
Reserve Fund	10,000	Debtors	12,000
Bank Loan	40,000	Plant	47,000
Capital:		Stock	42,000
Alex	60,000	Furniture	25,000
Felix	60,000
Total	1,97,000	Total	1,97,000

The firm was dissolved on 31st March, 2023.
(i) The assets realised were: Furniture – 22,500, Stock – 40,500, Plant – 48,000, Debtors – 10,500
(ii) Creditors were paid Rs.25,500 in full settlement.
(iii) Expenses on realization amounted to Rs.2,500.
Prepare Realisation Account, Partners' Capital Account and Bank Account.

(2024 Say - 8 Marks)

Answer:
Realisation Account

Particulars	Amount	Particulars	Amount
To Debtors	12,000	By Creditors	27,000
To Plant	47,000	By Bank Loan	40,000
To Stock	42,000	By Bank (Furniture)	22,500
To Furniture	25,000	By Bank (Stock)	40,500
To Bank (expenses)	2,500	By Bank (Plant)	48,000
To Profit on creditors settlement	1,500	By Bank (Debtors)	10,500
		By Loss transferred to:   Alex (2/3)   Felix (1/3)	8,000 4,000
Total	1,30,000	Total	1,30,000

Partners' Capital Accounts

Particulars	Alex	Felix	Particulars	Alex	Felix
To Realisation (loss)	8,000	4,000	By Balance b/d	60,000	60,000
To Bank (final payment)	74,667	78,333	By Reserve Fund	6,667	3,333
Total	82,667	82,333	Total	66,667	63,333

Bank Account

Particulars	Amount	Particulars	Amount
To Balance b/d	71,000	By Realisation (expenses)	2,500
To Realisation (Furniture)	22,500	By Creditors	25,500
To Realisation (Stock)	40,500	By Bank Loan	40,000
To Realisation (Plant)	48,000	By Alex's Capital	74,667
To Realisation (Debtors)	10,500	By Felix's Capital	78,333
Total	1,92,500	Total	1,92,500

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Note: These questions and answers are based on past examination papers. Always verify with your textbook and teacher for the most accurate information. Some calculations may need verification as indicated in the notes.

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