NCERT Solution - Dissolution of Partnership (Part - 2) Commerce Notes | EduRev

Accountancy Class 12

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Commerce : NCERT Solution - Dissolution of Partnership (Part - 2) Commerce Notes | EduRev

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Question 6: How will you deal with the Realisation expenses of the firm of Rashim and Bindiya in the following cases:
1. Realisation expenses amounts to Rs 1,00,000,
2. Realisation expenses amounting to Rs 30,000 are paid by Rashim, a partner.
3. Realisation expenses are to be borne by Rashim for which he will be paid Rs 70,000 as remuneration for completing the dissolution process. The actual expenses incurred by Rashim were Rs 1,20,000.
Answer :

Books of Rashim and Bindiya

Journal

 

Particulars

L.F.

Amount

Rs

Amount

Rs

1)

Realisation A/c

Dr.

 

1,00,000

 

 

To Bank A/c

 

 

 

1,00,000

 

(Realisation expenses paid)

 

 

 

 

 

 

 

 

 

 

2)

Realisation A/c

Dr.

 

30,000

 

 

To Rashim’s Capital A/c

 

 

 

30,000

 

(Realisation expenses borne by Rashim)

 

 

 

 

 

 

 

 

 

 

3)

Realisation A/c

Dr.

 

70,000

 

 

To Rashim’s Capital A/c

 

 

 

70,000

 

(Realisation expenses borne by Rashim and remuneration to him

for dissolution Rs 70,000)

    


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

Journal

Particulars

L.F.

Amount

Rs

Amount

Rs

Realisation A/c

Dr.

 

1,00,000

 

To Sundry Assets A/c

 

 

 

1,00,000

(Assets other than cash and bank transferred to Realisation Account)

 

 

 

 

 

 

 

 

 

Atul’s Capital A/c

Dr.

 

40,000

 

To Realisation A/c

 

 

 

40,000

(Atul took over 50% of assets worth Rs 1,00,000 at 20% discount)

[1,00,000 × (50/100) × (80/100)]

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

26,000

 

To Realisation A/c

 

 

 

26,000

(Assets worth Rs 20,000, i.e. 40% of assets of Rs 50,000 are sold

at a profit of 30%) [50,000 × (40/100) × (130/100)]

 

 

 

 

 

 

 

 

No entry is made for obsolescence of the assets and the assets given

to the creditors in the full settlement as these are already transferred to

the Realisation Account and adjusted)

   


Question 8: Record necessary journal entries to record the following unrecorded assets and liabilities in the books of Paras and Priya:
1. There was an old furniture in the firm which had been written-off completely in the books. This was sold for Rs 3,000,
2. Ashish, an old customer whose Account for Rs 1,000 was written-off as bad in the previous year, paid 60%, of the amount,
3. Paras agreed to take over the firm’s goodwill (not recorded in the books of the firm), at a valuation of Rs 30,000,
4. There was an old typewriter which had been written-off completely from the books. It was estimated to realize Rs 400. It was taken away by Priya at an estimated price less 25%,
5. There were 100 shares of Rs 10 each in Star Limited acquired at a cost of Rs 2,000 which had been written-off completely from the books. These shares are valued @ Rs 6 each and divided among the partners in their profit sharing ratio.
Answer :

 Books of Paras and Priya

Journal

 

Particulars

L.F.

Amount

Rs

Amount

Rs

1)

Bank A/c

Dr.

 

3,000

 

 

To Realisation A/c

 

 

 

3,000

 

(Unrecorded furniture sold)

 

 

 

 

 

 

 

 

 

 

2)

Bank A/c

Dr.

 

600

 

 

To Realisation A/c

 

 

 

600

 

(Bad Debt recovered which was previously written off as bad)

 

 

 

 

 

 

 

 

 

 

3)

Paras’s Capital A/c

Dr.

 

30,000

 

 

To Realisation A/c

 

 

 

30,000

 

(Unrecorded goodwill taken over by Paras)

 

 

 

 

 

 

 

 

 

4)

Priya’s Capital A/c

Dr.

 

300

 

 

To Realisation A/c

 

 

 

300

 

(Unrecorded Typewriter estimated Rs 400 taken over by Priya at

25% less price)

 

 

 

 

 

 

 

 

 

5)

Paras’s Capital A/c

Dr.

 

300

 

 

Priya’s Capital A/c

Dr.

 

300

 

 

To Realisation A/c

 

 

 

600

 

(100 shares of Rs 10 each  which were not recorded in the books 

taken @ Rs 6 each by Paras and Priya and divided between them in

their profit sharing ratio)

    

 

Question 9:

All partners wishes to dissolve the firm. Yastin, a partner wants that her loan of Rs 2,00,000 must be paid off before the payment of capitals to the partners. But, Amart, another partner wants that the capitals must be paid before the payment of Yastin’s loan. You are required to settle the conflict giving reasons.

Answer :
As per section 48 of Partnership Act 1932, at the time of dissolution, loans and advances from the partners must be paid off before the settlement of their capital accounts. Hence, Yastin’s argument is correct that her loan of Rs 2,00,000 must be paid off before the payment of partners' capital.

 

Question 10:

What journal entries would be recorded for the following transactions on the dissolution of a firm after various assets (other than cash) on the third party liabilities have been transferred to Reliasation Account.

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

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

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

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

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

Answer : 

Journal 

 

Particulars

L.F.

Amount

Rs

Amount

Rs

1

Arti’s Capital A/c

Dr.

 

68,000

 

 

To Realisation A/c

 

 

68,000

 

(Arti took over stock worth Rs 80,000 at Rs 68,000)

 

 

 

 

 

 

 

 

 

 

2.

Karim’s Capital A/c

Dr.

 

40,000

 

 

To Realisation A/c

 

 

40,000

 

(Karim took over an unrecorded bike of  Rs 40,000)

 

 

 

 

 

 

 

 

 

 

3.

Realisation A/c

Dr.

 

40,000

 

 

To Bank A/c

 

 

40,000

 

(Compensation paid to the employees )

 

 

 

 

 

 

 

 

 

4.

Realisation A/c

Dr.

 

30,600

 

 

To Bank A/c

 

 

 

30,600

 

(Creditors amounting Rs 36,000 were settled at a discount of 15%)

[36,000 × (85/100)]

 

 

 

 

 

 

 

 

 

5.

Arti’s Capital A/c

Dr.

 

18,000

 

 

Karim’s Capital A/c

Dr.

 

24,000

 

 

To Realisation A/c

 

 

 

42,000

 

(Loss on Realisation transferred to Partners’ Capital Account)

    

 

Question 11:

Rose and Lily shared profits in the ratio of 2:3. Their Balance Sheet on March 31, 2017 was as follows: 

Balance Sheet of Rose and Lily as on March 31, 2017 

 

Liabilities

Amount

Rs

Assets

Amount

 Rs

Creditors

40,000

Cash

 

16,000

Lily’s loan

32,000

Debtors

80,000

 

Profit and Loss

50,000

Less: Provision for doubtful Debts

3,600

76,400

Capitals:

 

 

 

 

Lily

1,60,000

Inventory

 

1,09,600

Rose

2,40,000

Bills Receivable

 

40,000

 

 

Buildings

 

2,80,000

 

5,22,000

 

 

5,22,000

 

 

 

 

 

 

Rose and Lily decided to dissolve the firm on the above date. Assets (except bills receivables) realised Rs 4,84,000.  Creditors agreed to take Rs 38,000. Cost of Realisation was Rs 2,400. There was a Motor Cycle in the firm which was bought out of the firm’s money, was not shown in the books of the firm. It was now sold for Rs 10,000. There was a contingent liability in respect of outstanding electric bill of Rs 5,000, Bill Receivable taken over by Rose at Rs 33,000.Show Realisation Account, Partners Capital Account, Loan Account and Cash Account.

Answer : 

Books of Rose and Lily

Realisation Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Debtors

80,000

Provision for Doubtful Debts

3,600

Inventory

1,09,600

Creditors

40,000

Bills Receivables

40,000

Cash:

 

 

Buildings

2,80,000

Motor cycle

10,000

 

Cash:

 

Other Assets

4,84,000

4,94,000

Outstanding Electricity Bill

5,000

 

Rose’s Capital (Bills Receivable)

33,000

Creditors

38,000

 

 

 

Expenses

2,400

45,400

 

 

 

 

 

 

Profit transferred to:

 

 

 

Rose' Capital

6,240

 

 

 

Lily's Capital

9,360

15,600

 

 

 

5,70,600

 

5,70,600

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital Account

Dr.

 

Cr.

Particulars

Rose

Lily

Particulars

Rose

Lily

Realisation  (Bills Receivable)

33,000

 

Balance b/d

2,40,000

1,60,000

Cash A/c

2,33,240

1,99,360

Profit and Loss

20,000

30,000

 

 

 

Realisation  (Profit)

6,240

9,360

 

2,66,240

1,99,360

 

2,66,240

1,99,360

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lily's Loan Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Cash

32,000

Balance b/d

32,000

 

 

 

 

 

32,000

 

32,000

 

 

 

 

 

Cash Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

16,000

Realisation:

 

Realisation:

 

Creditors

38,000

 

Motor Cycle

10,000

 

Outstanding Electricity Bill

5,000

 

Other Assets

4,84,000

4,94,000

Expenses

2,400

45,400

 

 

Lily's Loan

32,000

 

 

Rose’s Capital A/c

2,33,240

 

 

Lily’s Capital A/c

1,99,360

 

5,10,000

 

5,10,000

 

 

 

 

 

Note: In the solution Contingent Liability of Electricity Bill has been treated as Electricity Bill Payable. Further, it is also been assumed that Rosy has taken over Bills Receivable at Rs 33,000.

 

Question 12:

Shilpa, Meena and Nanda decided to dissolve their partnership on March 31,2006. 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, 2006

Liabilities

Amount

Rs

Assets

Amount

Rs

Capitals:

 

Land

81,000

Shilpa

80,000

Stock

56,760

Meena

40,000

Debtors

18,600

Bank loan

20,000

Nanda’s Capital Account

23,000

Creditors

37,000

Cash

10,840

Provision for doubtful debts

1,200

 

 

General Reserve

12,000

 

 

 

1,90,200

 

1,90,200

 

 

 

 

     

 

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

Answer : 

In the books of Shilpa, Meena and Nanda

Realisation Account

Dr.

 

Cr.

 

Particulars

Amount

Rs

Particulars

Amount

Rs

Land

81,000

Bank Loan

20,000

Stock

56,760

Creditors

37000

Debtors

18,600

Provision for doubtful debts

1,200

Shilpa’s Capital A/c

20,000

Shilpa’s Capital A/c (Stock)

35,000

Cash :

 

Cash:

 

Creditors

31000

 

Stock

14000

 

Realisation Expenses

1,200

32200

Debtors

12300

Profit transferred to

 

Land

1,10,000

1,36,300

Shilpa’s Capital A/c

10,470

 

 

 

 

 

Meena’s Capital A/c

6,980

 

 

 

Nanda’s Capital A/c

3,490

20,940

 

 

 

2,29,500

 

2,29,500

 

 

 

 

 

Partners’ Capital Account

Dr.

 

Cr.

 

Particulars

Shilpa

Meena

Nanda

Particulars

Shilpa

Meena

Nanda

Balance b/d

23,000

Balance b/d

80,000

40,000

Realisation 

35,000

 

 

General Reserve

6,000

4,000

2,000

(Stock)

 

 

 

Realisation

20,000

 

 

Cash

81,470

50,980

 

(Bank Loan)

 

 

 

 

 

 

 

Realisation(Profit)

10,470

6,980

3,490

 

 

 

 

Cash

 

 

17,510

 

1,16,470

50,980

23,000

 

1,16,470

50,980

23,000

 

 

 

 

 

 

 

 

 

Cash Account

Dr.

 

Cr.

 

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

10,840

Realisation (Expenses)

32,200

Realisation (Assets)

1,36,300

Shilpa’s Capital A/c

81,470

Nanda’s Capital A/c

17,510

Meena’s Capital A/c

50,980

 

 

 

 

 

1,64,650

 

1,64,650

      

  

Question 13:

Surjit and Rahi were sharing profits (losses) in the ratio of 3:2, their Balance Sheet as on March 31, 2017 is as follows:

 

Balance Sheet of Surjit and Rahi as on March 31, 2012

Liabilities

Amount

Rs

Assets

Amount

Rs

Creditors

38,000

Bank

11,500

Mrs. Surjit loan

10,000

Stock

6,000

Reserve

15,000

Debtors

19,000

Rahi’s loan

5,000

Furniture

4,000

Capital’s:

 

Plant

28,000

Surjit

10,000

Investment

10,000

Rahi

8,000

Profit and Loss

7,500

 

86,000

 

86,000

 

 

 

 

 

 

 

 

 

The firm was dissolved on March 31, 2017 on the following terms: 

1. Surjit agreed to take the investments at Rs 8,000 and to pay Mrs. Surjit’s loan.

2. Other assets were realised as follows:

Stock

Rs

5,000

Debtors

Rs

18,500

Furniture

Rs

4,500

Plant

Rs

25,000

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

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

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

Answer :
 

Books of Surjit and Rahi

Realisation Account

Dr.

 

Cr.

 

Particulars

Amount

Rs

Particulars

Amount

Rs

Stock

6,000

Creditors

38,000

Debtors

19,000

Mrs. Surjit's Loan

10,000

Furniture

4,000

Surjit’s Capital A/c (Investment)

8,000

Plant

28,000

Bank:

 

Investment

10,000

Stock

5,000

 

Surjit’s Capital A/c

10,000

Debtors

18,500

 

(Mrs. Surjit's Loan)

 

Furniture

4,500

 

Bank:

 

Plant

25,000

53,000

Expenses

1,600

 

Loss transferred to:

 

Creditors

37,000

38,600

Surjit’s Capital A/c

3,960

 

 

 

Rahi’s Capital A/c

2,640

6,600

 

 

 

 

 

 

1,15,600

 

1,15,600

 

 

 

 

 

Partners’ Capital Account

Dr.

 

Cr.

Particulars

Surjit

Rahi

Particulars

Surjit

Rahi

Realisation (Investment)

8,000

 

Balance b/d

10,000

8,000

Realisation (Loss)

3,960

2,640

Realisation (Mrs. Surjit Loan)

10,000

 

Profit and Loss

4,500

3,000

 

 

 

 

Bank

12,540

8,360

Reserve

9,000

6,000

 

 

 

 

 

 

 

29,000

14,000

 

29,000

14,000

 

 

 

 

 

 

 

Rahi's Loan Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

 

 

Balance b/d

5,000

Bank

5,000

 

 

 

 

 

 

 

5,000

 

5,000

 

 

 

 

 

Bank Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

11,500

Realisation (Creditors and Expenses)

38,600

Realisation A/c (Assets realised)

53,000

Rahi’s Loan

5,000

 

 

Surjit’s Capital A/c

12,540

 

 

Rahi’s Capital A/c

8,360

 

64,500

 

64,500

 

Question 14:

Rita, Geeta and Ashish were partners in a firm sharing profits/losses in the ratio of 3:2:1. On March 31, 2012 their balance sheet was as follows:

Liabilities

Amount

Rs

Assets

Amount

Rs

Capitals:

 

 

Cash

22,500

Rita

80,000

 

Debtors

52,300

Geeta

50,000

 

Stock

36,000

Ashish

30,000

1,60,000

Investments

69,000

Creditors

 

65,000

Plant

91,200

Bills payable

 

26,000

 

 

General reserve

 

20,000

 

 

 

 

2,71,000

 

2,71,000

 

 

 

 

 

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

1. Rita was appointed to realise the assets. Rita was to receive 5% commission on the rate of assets (except cash) and was to bear all expenses of Realisation,

2. Assets were realised as follows:

 

Rs

Debtors

30,000

Stock

26,000

Plant

42,750

3. Investments were realised at 85% of the book value,

4. Expenses of Realisation amounted to Rs 4,100,

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

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

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

Answer :
 

In the books of Rita, Geeta and Ashish

Realisation Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Debtors

52,300

Creditors

65,000

Stock

36,000

Bills Payable

26,000

Investment

69,000

Cash:

 

Plant

91,200

Debtors

30,000

 

Cash:

 

Stock

26,000

 

Outstanding Salaries

7,200

 

Plant

42,750

 

Discounted Bill

9,800

 

Investment

58,650

1,57,400

Creditors

65,000

 

 

 

Bills Payable

26,000

1,08,000

Loss transferred to

 

Rita’s Capital A/c

 

7,870

Rita’s Capital A/c

57,985

 

(Commission- 1,57,400 ´ 5/100)

 

Geeta’s Capital A/c

38,657

 

 

 

 

Ashish’s Capital A/c

19,328

1,15,970

 

 

 

 

 

 

 

 

364370

 

 

364370

 

 

 

 

 

 

 

Partners’ Capital Account

 

Dr.

 

Cr.

 

Particulars

Rita

Geeta

Ashish

Particulars

Rita

Geeta

Ashish

Realisation (Loss)

57,985

38,657

19,328

Balance b/d

80,000

50,000

30,000

Bank

39,885

18,010

14,005

General Reserve

10,000

6,667

3,333

 

 

 

 

Realisation

7,870

 

 

 

 

 

 

 

 

 

 

 

97,870

56667

33333

 

97870

56,667

33,333

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

22,500

Realisation A/c

1,08,000

Realisation

1,57,400

Rita’s Capital

39,885

 

 

Geeta’s Capital A/c

18,010

 

 

Ashish’s Capital A/c

14,005

 

 

 

 

 

1,79,900

 

1,79,900

 

 

 

 

 

NOTE: As per the solution, the Loss on Realisation should be Rs 1,15,970 and the total of Cash Account should be Rs 1,79,900; however, the answer given in the book shows Rs 1,29,455 and Rs 1,65,705 respectively.

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