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NCERT Solution - Dissolution of Partnership (Part - 2) | Accountancy Class 12 - Commerce PDF Download

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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FAQs on NCERT Solution - Dissolution of Partnership (Part - 2) - Accountancy Class 12 - Commerce

1. What is dissolution of partnership?

Ans. Dissolution of partnership refers to the process of ending a partnership firm and discontinuing its operations. It involves the termination of the existing partnership agreement and the distribution of assets and liabilities among the partners.

2. What are the reasons for the dissolution of partnership?

Ans. There can be several reasons for the dissolution of partnership, such as mutual consent of partners, expiry of the partnership term, death or insolvency of a partner, misconduct or incapacity of a partner, disagreement among partners, or court order.

3. How is the distribution of assets and liabilities done during the dissolution of partnership?

Ans. During the dissolution of partnership, the assets and liabilities of the firm are distributed among the partners in accordance with the agreed terms and conditions mentioned in the partnership agreement. The process involves selling the assets, settling the liabilities, and distributing the remaining amount among the partners as per their profit-sharing ratio.

4. Can a partnership firm be dissolved without the consent of all partners?

Ans. In general, a partnership firm cannot be dissolved without the consent of all partners. However, in certain situations, such as the death or insolvency of a partner, the partnership can be dissolved even without the consent of all partners. Additionally, if the partnership agreement contains provisions for dissolution in certain circumstances, those provisions can also be followed.

5. What are the legal formalities involved in the dissolution of partnership?

Ans. The legal formalities involved in the dissolution of partnership may vary depending on the jurisdiction and the terms mentioned in the partnership agreement. However, some common formalities include giving public notice of dissolution, settling the firm's debts and obligations, canceling registrations and licenses, filing appropriate legal documents, and updating necessary records with relevant authorities. It is advisable to consult a legal professional to ensure compliance with all legal requirements.

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