Class 12-commerce NCERT Solutions Accountancy Chapter 4: Dissolution of Partnership Firm

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Dissolution of Partnership Firm Exercise 244

Solution SA 1

Basis of Difference	Dissolution of Partnership	Dissolution of Partnership Firm
Meaning	It means change in the partnership deed (or agreement) among partners.	It means that the business is wound up and the firm is dissolved.
Discontinuation	Business is not discontinued.	Business is discontinued as the firm is dissolved.
Closure of Books of Accounts	Books of accounts are not closed, as there is only change in the existing agreement between partners.	Books of accounts are closed, as the business is discontinued.
Assets and Liabilities	Assets and liabilities are re-valued and a new balance sheet is drawn.	Assets are sold off to pay the liabilities of the business.
Role of Court	The court does not intervene as the partnership is dissolved by mutual agreement.	The court has inherent power to intervene. By its order, a firm can be dissolved.
Nature	It is voluntary.	It may be voluntary or compulsory (voluntary: according to discretion of the partners; compulsory: according to the order of the court).
Effect	It may or may not involve dissolution of the firm.	It necessarily involves the dissolution of both partnership and partnership firm.

Solution SA 2

Accounting treatment for

Unrecorded Assets: Unrecorded assets are omitted from the books or are assets whose value has been written off in the books of accounts but are still in working condition. The accounting treatment for unrecorded asset is

a) When the unrecorded asset is sold for cash
Cash A/c	Dr.
------To Realisation A/c
(Being unrecorded assets sold for cash)

b) When the unrecorded asset is taken over by any partner	Dr.
Partner's Capital A/c
-----To Realisation A/c
(Being unrecorded asset taken over by the partner)

Unrecorded Liabilities: Unrecorded liabilities are not recorded in the books of accounts. The accounting treatment for unrecorded liability is

a. When the unrecorded liability is paid through Realisation A/c
Realisation A/c	Dr.
------To Cash A/c
(Being unrecorded liability paid in cash)

b. When the unrecorded liability is taken over by a partner	Dr.
Realisation A/c
------To Partner's Capital A/c
(Being unrecorded liability taken over by the partner)

Solution SA 3

If a partner's loan appears on the assets side of the balance sheet, then it means that a partner has taken a loan from the firm and is liable to repay the amount to the firm. In such a situation, the loan amount is transferred to his/her capital account. Thus, the accounting entry will be

Partner's Capital A/c	Dr.
-----To Partner's Loan A/c
(Being partner's loan transferred to partner's Capital A/c)

If a partner's loan appears on the liabilities side of the balance sheet, then it means that the partner has lent a loan to the firm and the firm is liable to pay back the amount to the partner. In such a situation, the partner's loan is paid off after paying all the external liabilities of the firm. The partner's loan will be paid in cash and the following accounting entry will be passed:

Partner's Loan A/c	Dr.
-----To Cash/Bank A/c
(Being partner's loan paid in cash)

Dissolution of Partnership Firm Exercise 245

Solution SA 4

Basis of Difference	Firm's Debt	Partner's Private Debts
Meaning	Debts which are borrowed against the name of the firm.	Debts which are borrowed personally by the partner.
Liability	All the partners of the firm are jointly and severally liable.	Only the concerned partner will be personally liable.
Application of firm's assets	Firm's debts are settled first against the firm's assets. Subsequently, if any surplus exists, then this is distributed among the partners.	After paying off the firm's debts, the surplus of the firm's assets, if any, is distributed among the partners. The personal share of the partner in this surplus can be used to settle their own private debts.
Application of private assets	After paying off the partner's private debt, the surplus of the partner's private assets, if any, can be used to pay back the firm's debt only if the firm's debts exceed the firm's assets.	Private debts are settled first against the partner's private assets. Subsequently, if any surplus exists, then this may be used to settle the firm's debts.

Solution SA 5

According to Section 48 of the Partnership Act, 1932, following are the rules of the settlement of accounts on dissolution:

Application of Assets: Proceeds received from the sale (realisation) of the assets shall be applied in the following order:

First, all external liabilities and expenses are to be paid.
Second, all loans and advances lent by partners to the firm should be paid.
Lastly, the capital of each partner should be paid off.

If any surplus remains after the payment of (a), (b) and (c), then it should be distributed among the partners in their profit-sharing ratio.

Treatment of Loss: In case of any loss and deficiency, the treatment for the same should be made in the following order:

First, it should be adjusted against the firm's profits.
Then, it should be adjusted against total capital of the firm.
If any loss and deficiencies still exist, then it should be borne by all the partners individually in their profit-sharing ratio.

Solution SA 6

Basic of Difference	Realisation Account	Revaluation Account
Meaning	It records the proceeds due to sale of various assets and payment of various liabilities.	It records the effect of revaluation of assets and liabilities on the event of admission, retirement or death of a partner.
Time	It is prepared at the time of dissolution of the firm.	It is prepared at the time of admission, retirement or death of a partner.
Objective	To ascertain profit or loss on realisation (sale) of assets and payment of liabilities.	To ascertain profit or loss on revaluation of assets and liabilities.
Profit/Loss Distribution	Realisation profit or loss will be distributed among all the partners in their profit-sharing ratio.	Revaluation profit or loss will be distributed among the old partner of the firm in the old profit-sharing ratio.
Amount	Assets and liabilities are shown at the book value.	Increase or decrease in the value of assets and liabilities are shown in this account.
Records	All assets and liabilities are recorded here.	Only those assets and liabilities are recorded whose values have changed over a period of time.
Effect	All accounts of assets and liabilities are closed.	No account is closed on revaluation of assets and liabilities.

Solution LA 1

The process of discontinuation of a partnership business is known as dissolution of partnership. According to Section 39 of the Partnership Act, dissolution of partnership between all partners of a firm is called dissolution of a partnership firm. Dissolution involves winding up of business, disposal of assets, paying off liabilities and distribution of any surplus or loss by partners of the firm. According to the Partnership Act 1932, a partnership firm may be dissolved on any of the following grounds:

Dissolution by Agreement (Sec. 40)
Compulsory Dissolution (Sec. 41)
Dissolution due to Certain Contingencies (Sec. 42)
Dissolution by Notice of Partnership at Will (Sec. 43)
Dissolution by Court (Sec. 44)

Although the process of dissolution remains the same, the ways and modes in all five are different.

1. Dissolution by Agreement:

A firm may be dissolved with

a. Consent of all partners

b. Contract between partners

2. Compulsory Dissolution:

A firm may be dissolved by

a. Adjudication of all partners or of all partners but one as involved

b. Happening of an event or change in government policies which make the business unlawful

3. Dissolution due to Certain Contingencies:

Subject to the contract between partners, a firm is dissolved

a. If formed for a specific period, then on the expiry of the period

b. If formed for a specific purpose, then on completion of the purpose

c. On the death of partner/partners

d. On insolvency of a partner/partners

4. Dissolution by Notice:

If a partnership is at will, then the partnership firm is dissolved if any partner gives a written notice to all the other partners expressing his/her intention to dissolve the firm.

5. Dissolution by Court:

The court may order dissolution of a partnership firm when

a. A partner becomes insane or a lunatic.

b. A partner becomes permanently incapable of performing duties.

c. A partner is guilty of misconduct and affects business activities.

d. A partner repeatedly breaks the terms of agreement.

e. A partner transfers his interest to a third party without the consent of other partners.

f. A business persistently incurs losses.

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

Dissolution of a firm is carried out in three steps:

Preparation of a balance sheet of the firm to be dissolved
Realisation of assets and liabilities
Distribution of cash to creditors and partners

Also, for the settlement of accounts, Section 48 of the Partnership Act 1932 would be applicable.

Application of Assets: Amount received by the realisation (sale) of assets shall be used in the following order:

Debts of the firm towards third parties, or first, external liabilities and expenses are to be paid.
Then all loans and advances forwarded by partners should be paid.
Then the capital of each partner should be paid off. Any surplus remaining after the payment of (a), (b) and (c) should be distributed among partners in their profit-sharing ratio.

Treatment of Loss: Loss and any deficiency of capital should be paid in the following order:

First, these should be adjusted against the firm's profits.
Then against the total capital of the firm.
If there is still any loss and deficiency, then it should be borne by all partners individually in their profit-sharing ratio.

Solution LA 2

Dissolution of a partnership firm leads to discontinuation of business activities wherein all the books of accounts are to be closed. All the assets of business are sold off and all liabilities are paid off. To record the sale of assets and discharge of liabilities, a nominal account named realisation account is opened. The main purpose of this account is to ascertain the profit or loss due to the realisation of assets and liabilities. Realisation profit (i.e. credit side exceeding debit side) or realisation loss (i.e. debit side falling short of credit side) would be transferred to the partner's capital account in the profit-sharing ratio.

Important objectives of preparing a realisation account:

Closure of all the books of accounts
To record transactions relating to the sale of assets and discharge of liabilities
To determine profit or loss due to the realisation of assets and liabilities

Accounting treatment of items related to a realisation account

1) For transfer of assets	Dr.
Realisation A/c
-----To Sundry Assets A/c (Individually)
(Being all assets transferred to realisation account, except cash or bank, PandL debit balance and loan to a partner)

2) For transfer of liabilities	Dr.
Sundry Liabilities A/c (Individually)
-----To Realisation A/c
(Being all liabilities transferred to realisation account, except partner's capital, PandL credit balance, loan from a partner)

3) For sale of assets	Dr.
Bank A/c (Amount received)
-----To Realisation A/c
(Being assets sold for cash)

4) For payment of liabilities	Dr.
Realisation A/c
-----To Bank A/c
(Being expenses paid)

5) For payment of realisation expenses
Realisation A/c	Dr.
-----To Bank A/c
(Being expenses paid)

6) For transfer of profit on realisation
Realisation A/c	Dr.
-----To Partner's Capital A/c
(Being profit on realisation transferred to partner's capital account)

7) For transfer of loss realisation
Partner's Capital A/c	Dr.
-----To Realisation A/c
(Being loss transferred to partner's capital account)

Solution LA 4

Dissolution of a firm calls for closure of all accounts and realisation of assets and making payment to meet liabilities. At the time of dissolution of a firm, the amount received from the sale of the firm's assets is used to pay off creditors. If the amount received from the sale falls short, then the partner's private assets are used for settling the dues of the firm's creditors. Even if some portion of the amount due to creditors is left unpaid, then there arises deficiency of creditors. This deficiency can be treated in the following two ways:

Transferring deficiency to the Deficiency Account
Transferring deficiency to the Partner's Capital Account

In case the amount of deficiency is to be transferred to the Deficiency Account, then a separate account is prepared for the firm's creditors. A Cash Account is prepared to ascertain the firm's cash balance accruing from the sale of the firm's assets and partner's private assets. After ascertaining the cash availability with the firm, creditors and external liabilities are paid proportionately. The remaining unpaid creditors or the deficiency is transferred to the Deficiency Account.

In the second case, creditors are paid by the cash available with the firm, including the partner's individual contribution. The deficiency or unpaid creditor's amount is transferred to the Partner's Capital Account. Thus, the deficiency of creditors is borne by all partners in their profit-sharing ratio. If any partner becomes insolvent and is unable to bear the deficiency, then this will be regarded as a capital loss to the firm. If the partnership deed is silent about such capital loss in the facet of insolvency of a partner, then according to the Garner vs. Murray case, such capital loss needs to be borne by the solvent partners in their capital ratio.

Solution Num 1

Journal Entries
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
(a)	Realization A/c	Dr.		2,500
	------To Bank A/c				2,500
	(Being realization expenses paid)

(b)	Realization A/c	Dr.		3,000
	------To Ashok's Capital A/c				3,000
	(Being realization expenses paid by Ashok)

(c)	No entry as all realization expenses are borne personally by Tarun

(d)	Realisation A/c	Dr.		4,000
	------To Amit's Capital A/c				4,000
	(Being realization expenses paid to Amit)
		Dr.

Solution Num 2

Journal Entries
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
(a)	Realization A/c	Dr.		40,000
	------To Cash A/c				40,000
	(Being creditors worth Rs.85,000 accepted Rs.40,000 as cash and investment worth Rs.43,000 in their full settlement)

(b)	No Entry
	(Being creditors Rs.16,000 accepted Machinery Rs.18,000 in the full settlement. No entry is required since both asset and liability are already transferred to the Realization Account)

(c)	Cash A/c	Dr.		30,000
	------To Realization A/c				30,000
	(Being creditors worth Rs. 90,000 accepted buildings worth Rs. 1,20,000 and returned Rs.30,000 as cash after settlement of claim to the firm)

Solution Num 3

Journal Entries
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Nitin's Capital A/c	Dr.		3,000
	------To Realization A/c				3,000
	(Being unrecorded computer taken over by Nitin)

Solution Num 4

Journal Entries
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
a)	Realization A/c	Dr.		3,200
	-----To Bank A/c				3,200
	(Being unrecorded liabilities paid)

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

c)	Realization A/c	Dr.		18,000
	-----To Ashish's Capital A/c				7,500
	-----To Tarun's Capital A/c				10,500
	(Being profit on Realization is transferred to Partner's Capital Account)
d)	Bank A/c	Dr.		5,500
	-----To Realization A/c				5,500
	(Being unrecorded asset sold)

Solution Num 5

Journal Entries
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
1)
a)	For Transfer of Assets
	Realization A/c	Dr.
	-----To Assets A/c (Individually)
	(Being assets transferred to Realization Account)
b)	For Transfer of Liabilities
	Liabilities A/c (Individually)	Dr.
	-----To Realizations A/c
	(Being liabilities transferred to realization account)

c)	For sale of Asset
	Cash/Bank A/c	Dr.
	-----To Realizations A/c
	(Being assets sold)

d)	For liabilities paid
	Realization A/c	Dr.
	-----To Cash/Bank A/c
	(Being liabilities paid)

2)	Aziz's Capital A/c	Dr.		64,000
	-----TO Realization A/c				64,000

3)	Bank A/c	Dr.		1,04,000
	-----To Realization A/c				1,04,000

4)	Bank A/c	Dr.
	-----To Realization A/c
	(Being land and building sold for Rs.3,00,000 and 2% commission paid to broker)

5)	No entry
	(Being plant and machinery Rs. 60,000 handed over to the creditors at a discount of 10%. No entry is required as both the asset and liability are already transferred to the Realization Account)

6)	Bank A/c	Dr.		2,000
	-----To Realization A/c				2,000
	(Being investment worth Rs.4,000 were realized at 50%)

Solution 3

Specimen Realisation Account
Dr.				Cr.
Particulars	Amount Rs.	Particulars	Amount Rs.
To Sundry Assets A/c (Excluding cash/bank, fictitious assets, debit balance of PandL A/c and loan to partner)	-	By Various Liabilities A/c (Excluding partner's capital account, reserves, PandL A/c, current A/c, loan to partner)	-

To Reserve for Discount on Creditors A/c	-	By Provision on Assets (like provision for doubtful debts, provision for depreciation)	-

To Cash/Bank A/c (Payment to outside and unrecorded liabilities)	-	By Cash/Bank (Amount received from realisation of assets and unrecorded assets)	-

To Partner's Capital A/c (If any liabilities taken on expenses paid by him or remuneration payment to him)	-	By Partner's Capital A/c (If any assets taken over by any partner)	-

To Profit Transferred to Partner's Capital A/c	-	By Loss Transferred to Partner's Capital A/c	-

	-		-

Dissolution of Partnership Firm Exercise 246

Solution Num 6

Books of Rashim and Bindiya Journal Entries
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
1)	Realization A/c	Dr.		1,00,000
	-----To bank A/c				1,00,000
	(Being realization expenses paid)

2)	Realization A/c	Dr.		30,000
	-----To Rashim's Capital A/c				30,000
	(Being realization expenses borne by Rashim)

3)	Realization A/c	Dr.		70,000
	------To Rashim's Capital A/c				70,000
	(Being realization expenses borne by Rashim and remuneration to him for dissolution Rs.70,000)

Solution Num 7

Journal
Particulars		L.F.	Debit Rs.	Credit Rs.
Realization A/c			1,00,000
-----To Sundry Assets A/c	Dr.			1,00,000
(Being assets other than cash and bank transferred to Realization Account)

Atul's Capital A/c	Dr.		40,000
-----To Realization A/c				40,000


Bank A/c	Dr.		26,000
-----To Realization A/c				26,000


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 Realization Account and adjusted)

Solution Num 8

Books of Paras and Priya Journal
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
1)	Bank A/c	Dr.		3,000
	-----To reallistion A/c				3,000
	(Being unrecorded furniture sold)

2)	Bank A/c	Dr.		600
	-----To Realization A/c				600
	(Being bad debts recovered which was previously written off as bad)

3)	Paras's Capital A/c	Dr.		30,000
	------To Realization A/c				30,000
	(Being unrecorded goodwill taken over by Paras)

4)	Priya's Capital A/c	Dr.		300
	-----To Realization A/c				300
	(Being 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 Realization A/c				600
	(Being 100 share 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)

Solution Num 9

According to 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.

Solution Num 10

Books of Paras and Priya Journal
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
1	Arti's Capital A/c	Dr.		68,000
	-----To, Realization A/c				68,000
	(Being Arti took over stock worth Rs.80,000 at Rs. 68,000)

2.	Karim's Capital A/c	Dr.		40,000
	-----To Realization A/c				40,000
	(Being Karim took over an unrecorded bike of Rs. 40,000)

3.	Realization A/c	Dr.		40,000
	-----To Bank A/c				40,000
	(Being compensation paid to the employees)

4.	Realization A/c	Dr.		30,600
	-----To Bank A/c				30,600


5.	Arti's Capital A/c	Dr.		18,000
	Karim's Capital A/c	Dr.		24,000
	-----To Realization A/c				42,000
	(Being loss on realization transferred to Partner's Capital Account)

Dissolution of Partnership Firm Exercise 247

Solution Num 11

Books of Rose and Lily Realisation Account
Dr.						Cr.
Particulars		Amount Rs.	Particulars		Amount Rs.
To Debtors A/c		80,000	By Provision for Doubtful Debts A/c		3,600
To Inventory A/c		1,09,000	By Creditors A/c		40,000
To Bills Receivables A/c		40,000	By Cash A/c
To Buildings A/c		2,80,000	By Assets:
			Motor cycle	10,000
To Cash:			Other Assets	4,84,000	4,94,000
Outstanding Electricity Bill	5,000		By Rose's Capital A/c (Bills Receivable)		33,000
Creditors	38,000
Expenses	2,400	45,400

To Profit transferred to:
Rose's Capital A/c	6,240
Lily's Capital A/c	9,360	15,600
		5,70,600			5,70,600

Partner's Capital Accounts
Dr						Cr
Particulars	Rose	Lily	Particulars	Rose	Lily
To Realization A/c (Bills Receivable)	33,000		By Balance b/d	2,40,000	1,60,000
To Cash A/c	2,33,240	1,99,360	By Profit and Loss A/c	20,000	30,000
			By Realization A/c (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.
To Cash A/c	32,000	By Balance c/d	32,000


	32,000		32,000

Cash Account
Dr.						Cr.
Particulars		Amount Rs.	Particulars		Amount Rs.
To Balance b/d		16,000	By Realization:
To Realization:			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
			By Lily's Loan		32,000
			By Rose's Capital A/c		2,33,240
			By Lily's Capital A/c		1,99,360


		5,10,000			5,10,000

Solution Num 12

In the Books of Shilpa ,Meena and Nanda Realisation Account
Dr.						Cr.
Particulars		Amount Rs.	Particulars		Amount Rs.
To Land A/c		81,000	By Bank loan A/c		20,000
To Stock A/c		56,760	By Creditors A/c		37,000
To Debtors A/c		18,600	By Provision for doubtful debts A/c		1,200
To Shilpa's Capital A/c		20,000	By Shilpa's Capital A/c (Stock)		35,000
To Cash:			By Cash:
To Creditors	31,000		Stock	14,000
To Realization Expenses	1,200	32,200	Debtors	12,300
To 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

Partner's Capital Accounts
Dr								Cr
Particulars	Shilpa	Meena	Nanda	Particulars	Shilpa	Meena	Nanda
To Balance b/d	-	-	23,000	By Balance b/d	80,000	40,000	-
To Realzation A/c (Stock)	35,000			By General Reserve A/c	6,000	4,000	2,000
To Cash A/c	81,470	50,980		By Realization A/c (Bank Loan)	20,000
				By Realization A/c (Profit)	10,470	6,980	3,490
				By Cash A/c			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.
To Balance b/d	10,840	By Realization (Expenses)	32,200
To Realization A/c(Assets)	1,36,300	By Shilpa capital A/c	81,470
To Nanda's Capital A/c	17,510	By Meena's Capital A/c	50,980

	1,64,650		1,64,650

Dissolution of Partnership Firm Exercise 248

Solution Num 13

Books of Surjit and Rahi Realisation Account
Dr.						Cr.
Particulars		Amount Rs.	Particulars		Amount Rs.
To Stock A/c		6,000	By Creditors A/c		38,000
To Debtors A/c		19,000	By Mrs. Surjit's Loan A/c		10,000
To Furniture A/c		4,000	By Surjit's Capital A/c (Investment)		8,000
To Plant A/c		28,000	By Bank :
To Investment A/c		10,000	Stock	5,000
To Surjit's Capital A/c (Mrs. Surjit's Loan)		10,000	Debtors	18,500
To Bank:			Furniture	4,500
Expenses	1,600		Plant	25,000	53,000
Creditors	37,000	38,600	By Loss transferred to:
			Surjit's Capital A/c	3,960
			Rahi's Capital A/c	2,640	6,600

		1,15,600			1,15,600

Partner's Capital Accounts
Dr						Cr
Particulars	Surji	Rahi	Particulars	Surjit	Rahi
To Realization A/c (Investment)	8,000		By Balance b/d	10,000	8,000
To Realization A/c (Loss)	3,960	2,640	By Realization A/c (Mrs. Surjit Loan)	10,000
To Profit and Loss A/c	4,500	3,000	By Reserve A/c	9,000	6,000
To Bank A/c	12,540	8,360
	29,000	14,000		29,000	14,000

Rahi's Loan Account
Dr.				Cr.
Particulars	Amount Rs.	Particulars	Amount Rs.
To Bank A/c	5,000	By Balance b/d	5,000


	5,000		5,000

Bank Account
Dr.				Cr.
Particulars	Amount Rs.	Particulars	Amount Rs.
To Balance b/d	11,500	By Realization A/c (Creditors and Expenses)	38,600
To Realization A/c (Assets realized)	53,000	By Rahi's Loan A/c	5,000
		By Surjit's Capital A/c	12,540
		By Rahi's Capital A/c	8,360

	64,500		64,500

Solution Num 14

In the Books of Rita,Geeta and Ashish Realisation Account
Dr.						Cr.
Particulars		Amount Rs.	Particulars		Amount Rs.
To Debtors A/c		52,300	By Creditors A/c		65,000
To Stock A/c		36,000	By Bills payable A/c		26,000
To Investment A/c		69,000	By Cash:
To Plant A/c		91,200	Debtors	30,000
To Cash:			Stock	26,000
Outstanding Salaries	7,200		Plant	42,750
Discounted Bill	9,800		Investment	58,650	1,57,400
Creditors	65,000
Bill's Payable	26,000	1,08,000	By Loss transferred to
To Rita's capital A/c		7,870	Rita's Capital A/c	57,985
			Geeta's Capital A/c	38,657
			Ashish's Capital A/c	19,328	1,15,970
		3,64,370			3,64,370

Partner's Capital Accounts
Dr								Cr
Particulars	Rita	Geeta	Ashish	Particulars	Rita	Geeta	Ashish
To Realization A/c (Loss)	57,985	38,657	19,328	By Balance b/d	80,000	50,000	30,000
To Bank A/c	39,885	18,010	14,005	By General Reserve A/c	10,000	6,667	3,333
				By Realization A/c	7,870

	97,870	56,667	33,333		97,870	56,667	33,333

Cash Account
Dr.				Cr.
Particulars	Amount Rs.	Particulars	Amount Rs.
To Balance b/d	22,500	By Realization A/c	1,08,000
To Realization A/c	1,57,400	By Rita's Capital A/c	39,885
		By Geeta's Capital A/c	18,010
		By Ashish's Capital A/c	14,005


	1,79,900		1,79,900

Dissolution of Partnership Firm Exercise 249

Solution Num 15

Books of Anup and Sumit Realisation Account
Dr.						Cr.
Particulars		Amount Rs.	Particulars		Amount Rs.
To Sundry Debtors A/c		12,000	By Sundry Creditors A/c		27,000
To Plant A/c		47,000	By Loan A/c		40,000
To Stock A/c		42,000	By Bank:
To Lease hold land A/c		60,000	Lease hold Land	72,000
To Furniture A/c		25,000	Furniture	22,500
To Bank:			Stock	40,500
Creditors	25,500		Plant	48,000
Loan	40,000		Sundry Debtors	10,500	1,93,500
Expenses	2,500	68,000
To Profit transferred to
Anup's Capital A/c	3,250
Sumit's Capital A/c	3,250	6,500
		2,60,500			2,60,500

Partner's Capital Accounts
Dr						Cr
Particulars	Anup	Sumit	Particulars	Anup	Sumit
To Bank A/c	68,250	68,250	By Balance b/d	60,000	60,000
			By Reserve Fund A/c	5,000	5,000
			By Realization A/c	3,250	3,250

	68,250	68,250		68,250	68,250

Bank Account
Dr.				Cr.
Particulars	Amount Rs.	Particulars	Amount Rs.
To Balance b/d	11,000	By Realization A/c (Expenses and Liabilities)	68,000
		By Anup's Capital A/c	68,250
To Realization A/c (Assets)	1,93,500	By Sumit's Capital A/c	68,250


	2,04,500		2,04,500

Dissolution of Partnership Firm Exercise 250

Solution Num 16

Books of Ashu and Harish Realisation Account
Dr.					Cr.
Particulars		Amount Rs.	Particulars	Amount Rs.
To Building A/c		80,000	By Creditors A/c	88,000
To Machinery A/c		70,000	By Bank overdraft A/c	50,000
To Furniture A/c		14,000	By Ashu's Capital A/c (Assets taken)	1,43,000
To Stock A/c		20,000	By Harish's capital A/c (Assets taken)	1,12,000
To Investment A/c		60,000	By Cash A/c (Debtors)	46,000
To Debtors A/c		48,000
To Ashu's Capital A/c (Creditors)		88,000
To Harish's Capital A/c (Bank Overdraft)		50,000
To Cash A/c (Expenses)		3,000
To Profit transferred to
Ashu's Capital A/c	3,600
Harish's Capital A/c	2,400	6,000
		4,39,000		4,39,000

Partner's Capital Accounts
Dr						Cr
Particulars	Ashu	Harish	Particulars	Ashu	Harish
To Realization A/c (Assets taken)	1,43,000	1,12,000	By Balance b/d	1,08,000	54,000
To Cash A/c	56,600		By Realization A/c (Liabilities)	88,000	50,000
			By Realization A/c (Profit)	3,600	2,400
			By Cash A/c		5,600
	1,99,600	1,12,000		1,99,600	1,12,000

Cash Account
Dr.				Cr.
Particulars	Amount Rs.	Particulars	Amount Rs.
To Balance b/d	8,000	By Realization A/c (Expenses)	3,000
To Realization A/c (Debtors)	46,000	By Ashu's Capital A/c	56,600
To Harish's Capital A/c	5,600

	59,600		59,600

Note: However, the answer mentioned in the book is Rs. 14,000. But, as per the solution, the Profit on Realization is Rs. 6,000;

Working Notes:

	Ashu	Harish
Building	95,000
Machinery		80,000
Stock (3:2)	12,000	8,000
Investment (3:2)	36,000	24,000
	Rs.1,43,000	Rs.1,12,000

Solution Num 17

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

Partner's Capital Accounts
Dr								Cr
Particulars	Sanjay	Tarun	Vineet	Particulars	Sanjay	Tarun	Vineet
To Realization A/c (loss)	30,650	20,433	10,217	By Balance b/d	1,00,000	1,00,000	70,000
To Cash A/c	87,650	79,567	59,783	By Realization A/c	18,300
				(commission)

	1,18,300	1,00,000	70,000		1,18,300	1,00,000	70,000

Cash Account
Dr.				Cr.
Particulars	Amount Rs.	Particulars	Amount Rs.
To Balance b/d	32,000	By Realization A/c	1,10,000
To Realization A/c	3,05,000	By Sanjaya's Capital A/c	87,650
		By Tarun's Capital A/c	79,567
		By Vineet Capital A/c	59,783

	3,37,000		3,37,000

Dissolution of Partnership Firm Exercise 251

Solution Num 18

Books of Gupta and Sharma Journal
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
2017
Mar.31	Realization A/c	Dr.		2,35,500
	-----To Sundry Debtors A/c				55,000
	-----To Stock A/c				44,000
	-----To Bills Receivable A/c				19,000
	-----To Machinery A/c				52,000
	-----To Investment A/c				38,500
	-----To Fixtures A/c				27,000
	(Being assets transferred to Realization Account)

Mar. 31	Sundry Creditors A/c	Dr.		38,000
	Mrs. Gupta's Loan A/c	Dr.		20,000
	Mrs. Sharma's Loan A/c	Dr.		30,000
	Provision for Doubtful Debts	Dr.		4,000
	----To Realization A/c				92,000
	(Being liabilities transferred to Realization Account)

Mar. 31	Bank A/c	Dr.		1,59,000
	----To Realization A/c				1,59,000
	(Being assets realized: sundry Debtors Rs.52,000, Stock Rs.42,000, bills receivable Rs.16,000, Machinery Rs.49,000)

Mar.31	Realization A/c	Dr.		20,000
	----To Gupta's Capital A/c				20,000
	(Being Gupta took over Mrs. Gupta's Loan)

Mar. 31	Gupta's Capital A/c	Dr.		36,000
	----To Realization A/c				36,000
	(Being investment taken over by Gupta)

Mar.31	Realization A/c	Dr.		66,860
	--------To Bank A/c				66,860
	(Being liabilities paid: Mrs. Shrama's loan Rs. 30,000 and Creditors Rs. 38,000 paid off less 3% discount)

Mar. 31	Realization A/c	Dr.		1,200
	-----To Bank A/c				1,200
	(Being realization expenses paid)

Mar. 31	Gupta's Capital A/c	Dr.		18,280
	Sharma's Capital A/c	Dr.		18,280
	--------To Realization A/c				36,560
	(Being Loss on Realization transferred to Partner's capital Account)

Mar. 31	Reserve Fund A/c	Dr.		6,000
	--------To Gupta's Capital A/c				3,000
	--------To Sharma's Capital A/c				3,000
	(Being reserve fund distributed among partners ratio)

Mar 31	Gupta's Capital A/c	Dr.		58,720
	Sharma's Capital A/c	Dr.		44,720
	--------To Bank A/c				1,03,440
	(Being final payment made to partners)

Books of Gupta and Sharma Realization Account
Dr.						Cr.
Particulars		Amount Rs.	Particulars		Amount Rs.
To Sundry Debtors A/c		55,000	By Sundry Creditors A/c		38,000
To Stock A/c		44,000	By Mrs. Gupta's loan A/c		20,000
To Bills Receivable A/c		19,000	By Mrs. Sharma Loan A/c		30,000
To Machinery A/c		52,000	By Provision for Doubtful Debts A/c		4,000
To Investment A/c		38,500	By Bank:
To Fixtures A/c		27,000	Sundry Debtors	52,000
To Gupata's Capital A/c (Mrs. Gupta Loan)		20,000	Stock	42,000
To Bank A/c			Bills Receivable	16,000
Creditors	36,860		Machinery	49,000	1,59,000
Mrs. Sharma's Loan	30,000		By Gupta's Capital A/c (Investment)		36,000
Expenses	1,200	68,060	By Loss transferred to
			Gupta's Capital A/c	18,280
			Sharma's Capital A/c	18,280	36,560
		3,23,560			3,23,560

Partner's Capital Accounts
Dr						Cr
Particulars	Gupta	Sharma	Particulars	Gupta	Sharma
Realization(Investment)	36,000		By Balance b/d	90,000	60,000
Realization A/c (Loss)	18,280	18,280	By Realization (Mrs. Gupta Loan)	20,000
Bank A/c	58,720	44,720	By Reserve Fund	3,000	3,000

	1,13,000	63,000		1,13,000	63,000

Bank Account
Dr.				Cr.
Particulars	Amount Rs.	Particulars	Amount Rs.
Balance b/d	12,500	By Realization A/c (Payment of expenses and liabilities)	68,060
Realization A/c (Assets realized)	1,59,000	By Gupta's Capital A/c	58,720
		By Sharama's Capital A/c	44,720

	1,71,500		1,71,500

Solution Num 19

Realization Account
Dr.						Cr.
Particulars		Amount Rs.	Particulars		Amount Rs.
To Sundry Debtors A/c		58,000	By Sundry Creditors A/c		20,000
To Stock A/c		39,500	By Bill's payable A/c		25,500
To Machinery A/c		48,000	By Ashok's Current A/c (Investment)		40,000
To Investment A/c		42,000	By Babu's Current A/c (Machinery)		45,000
To Freehold property A/c		50,500	By Chetan's Current A/c (Freehold property)		55,000
To Bank:			By Bank:
Sundry Creditors	18,600		Sundry Debtors	56,500
Bills payable	25,500		Stock	36,500
Expenses	3,000	47,100	Unrecorded computer	9,000	1,02,000
To Profit transferred to
Ashok's Current A/c	1,200
Babu's Current A/c	800
Chetan's Current A/c	400	2,400
		2,87,500			2,87,500

Partner's Current Accounts
Dr								Cr
Particulars	Ashok	Babu	Chetan	Particulars	Ashok	Babu	Chetan
To Realization A/c (Assets taken)	40,000	45,000	55,000	By Balance b/d	10,000	5,000	3,000
				By Realization A/c (Profit)	1,200	800	400
				By Ashoks's capital A/c	28,800
				By Babu's capital A/c		39,200
				By Chetan capital A/c			51,600
	40,000	45,000	55,000		40,000	45,000	55,000

Partner's Capital Accounts
Dr								Cr
Particulars	Ashok	Babu	Chetan	Particulars	Ashok	Babu	Chetan
To Ashok's Current A/c	28,800			By Balance b/d	70,000	55,000	27,000
To Babu's Current A/c		39,200		By Bank A/c			24,600
To Chetan's Current A/c			51,600
To Bank A/c	41,200	15,800

	70,000	55,000	51,600		70,000	55,000	51,600

Babu's Loan Account
Dr.				Cr.
Particulars	Amount Rs.	Particulars	Amount Rs.
To Cash A/c	30,000	By Balance b/d	30,000


	30,000		30,000

Bank Account
Dr.				Cr.
Particulars	Amount Rs.	Particulars	Amount Rs.
To Balance b/d	7,500	By Realization A/c (Expenses and Liabilities)	47,100
To Realization A/c (Assets realized)	1,02,000	By Babu's Loan A/c	30,000
To Chetan's Capital A/c	24,600	By Ashok's Capital A/c	41,200
		By Babu's Capital A/c	15,800

	1,34,100		1,34,100

Dissolution of Partnership Firm Exercise 252

Solution Num 20

Books of Tanu and Manu Realisation Account
Dr.					Cr.
Particulars	Amount Rs.	Particulars		Amount Rs.
To Sundry Debtors A/c	55,000	By Sundry Creditors A/c		62,000
To Stock A/c	75,000	By Bills Payable A/c		32,000
To Motor Ca A/c r	90,000	By Bank Loan A/c		50,000
To Machinery A/c	45,000	Tanu's Capital A/c
To Investment A/c	70,000	Sundry Debtors A/c	55,000
To Fixtures A/c	9,000	Motor Car A/c	60,000	1,15,000
To Manu's Capital A/c (Bills Payable)	30,400	By Bank:
To Bank A/c (Expenses)	2,200	Stock	10,000
To Tanu's Capital A/c (Bank Loan)	50,000	Investment	76,000
		Fixtures	4,000	90,000
		By Manu's Capital A/c (Machinery)		40,000
		By Loss transferred to	23,500
		Tanu's Capital A/c	14,100	37,600
		Manu's Capital A/c
	4,26,600			4,26,600

Partner's Capital Accounts
Dr						Cr
Particulars	Tanu	Manu	Particulars	Tanu	Manu
To Realzation A/c (Assets taken)	1,15,000	40,000	By Balance b/d	1,10,000	90,000
To Realization A/c (Loss)	23,500	14,100	By Realization A/c (Liabilities)	50,000	30,400
To Bank A/c	31,500	72,300	By Reserve Fund A/c	10,000	6,000

	1,70,000	1,26,400		1,70,000	1,26,400

Bank Account
Dr.				Cr.
Particulars	Amount Rs.	Particulars	Amount Rs.
To Balance b/d	16,000	By Realization A/c (Expenses)	2,200
To Realization A/c (Assets)	90,000	By Tanu's Capital A/c	31,500
		By Manu's Capital A/c	72,300

	1,06,000		1,06,000

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