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 |