G1 6.3 Partnership - Dissolution

6.
PARTNERSHIP ACCOUNTING
Dissolution of Firm
Question 30: A, B and C are partners in a firm sharing profits and losses in the ratio of 3:2:1. They
decided to dissolve the partnership business as on 31-12-12. Following is the B/S on the date of
dissolution:
Balance Sheet of newly reconstituted firm as on 31.12.2006
Liabilities
Capital Accounts
A
B
C
Bank overdraft
Sundry Creditors
Assets
Machinery
20,000 Furniture
10,000 Stock
2,000 Debtors
6,000
12,000
50,000
31,000
3,000
10,000
6,000
50,000
Following assets were realised in cash: Machinery at 22,000; 50% of the stock at 3,500; & Debtors
were collected at 15% less than their book values. Remaining 50% of the stock was taken over by A
at 3,200. Furniture was taken over by B at 2,400. Realization expenses were 300. Pass necessary
journal entries to close the books of the firm and also prepare Realization A/c, Bank A/c & Partners
Capital A/c.
Answer:
Realization A/c
To Machinery A/c
Dr 50,000
31,000
To Furniture A/c
To Stock A/c
To Debtors A/c
3,000
10,000
6,000
A capital A/c
B Capital A/c
Dr
Dr
To Realization A/c
5,600
Sundry Creditors A/c Dr. Dr 12,000

To Realization A/c
12,000
A Capital A/c
Dr
B Capital A/c
Dr
C Capital A/c
Dr
To Realization A/c
Bank A/c Dr.

To Realization A/c
Dr 30,600
Bank A/c
To C Capital A/c
Realization A/c Dr.

To Bank A/c
Dr 12,000
Realization A/c Dr.

To Bank A/c
Financial Accounting
30,600
12,000
Dr
3,200
2,400
A Capital A/c
B Capital A/c
To Bank A/c
7,050
4,700
2,350
14,100
350
350
Dr
Dr
9,750
2,900
12,650
300
300
6.3.1
Realization A/c
Particulars
To Machinery A/c
Particulars
31,000 By Sundry Creditors. A/c
Furniture A/c
3,000
Stock A/c
10,000
Debtors A/c
6,000
12,000
Bank A/c (assets realised)

A Capital A/c (Stock taken over)
3,200
B Capital A/c (furniture taken over)
2,400
Bank A/c (sundry creditors) 12,000
Partners Capital A/cs (loss):
Bank A/c (expenses)
[A 7,050/ B-4,700/C-2,350]
300
62,300
A
3,200
7,050
14,100
62,300
Bank A/c
30,600 By Balance b/d (Note 1)
6,000
350
Realization A/c (creditors) 12,000
Realization A/c (expenses)
300
Capital A/c
12,650
(A-9,750; B-2,900)
30,950
30,950
To Realization A/c
Cs Capital A/c
Particulars
To Realization A/c
Realization A/c
(loss)
Bank A/c
30,600
Partners Capital A/c

B
C
Particulars
2,400
---- By Balance b/d
4,700 2,350
Bank A/c
A
B
C
20,000 10,000 2,000
------350
9,750 2,900
---20,000 10,000 2,350
20,000 10,000 2,350
Working Note: (1) Bank overdraft represents adverse balance in the Bank Account. therefore, it
should not be transferred to Realization Account.
[CA PE II N08, 8 marks]
Question 31: Dissolution of Firm: X, Y and Z are partners of the firm XYZ and Co., sharing Profits
and Losses in the ratio of 4:3:2. Following is the Balance sheet of the firm as at 31st March, 2008:
Liabilities
Partners Capitals:
Assets
Fixed Assets
5,00,000
4,00,000 Stock in trade
3,00,000
3,00,000 Sundry debtors
5,00,000
2,00,000 Cash in hand
General Reserve
90,000
Sundry Creditors
3,20,000
13,10,000
Partnership Accounting
10,000
13,10,000
6.3.2
Partners of the firm decided to dissolve the firm on the above said date. It was found that a credit
purchase of 20,000 in January, 2008 had not been recorded in the books of the firm.
Fixed assets realized 520,000 and book debts 440,000.
Stocks were valued at 250,000 and it was taken over by partner Y.
Creditors allowed discount of 5% and the expenses of realization amounted to 6,000.
You are required to prepare: (i) Realization A/c; (ii) Partners capital A/c; and (iii) Cash account.
Answer:
Realization A/c
Particulars
To Fixed assets
Particulars
5,00,000 By Creditors
3,20,000
Stock in trade
3,00,000
Cash (5,20,000+4,40,000)
9,60,000
Debtors
5,00,000
Y (Stock taken over)
2,50,000
Cash Expenses
6,000
Cash Creditors
Capital a/c (Loss)
3,23,000
(3,40,000x 95% )
44,000
33,000
22,000
16,29,000
16,29,000

Particulars
To
Realization
Account
44,000
33,000
22,000
Realization
Account
2,50,000
3,96,000
47,000
1,98,000
4,40,000
3,30,000
2,20,000
Cash
By
Particulars
Balance b/d
4,00,000
3,00,000
2,00,000
40,000
30,000
20,000
4,40,000
3,30,000
2,20,000
General
reserve
Cash A/c
Particulars
To Balance b/d
Realization A/c
Particulars
10,000 By Realization A/c (Expenses)

9,60,000
6,000
Realization A/c (Creditors)
3,23,000
(Fixed assets and
X Capital A/c
3,96,000
book debts realized)
Y Capital A/c
47,000
Z Capital A/c
1,98,000
9,70,000
9,70,000
6.3.3
There are two methods followed to share the deficiency of the insolvent partner:
(a) Garner Vs. Murray Rule (b) Indian Partnership Act, 1932.
[CMA INTER J09, 4 Marks]

Question: State briefly the rule Garner vs. Murray
Answer: Garner vs. Murray Rule: (The third partner who became insolvent was Mr. Wilkins)
The deficiency of the insolvent partner shall be taken over by the solvent partners. The following
steps are taken:
1. The loss on Realization shall be shared between all the partners (including the insolvent
partner) in their profit sharing ratio.
2. The solvent partners shall bring in cash equal to the amount of loss suffered by them.
3. The deficiency of the insolvent partner shall be taken over by the solvent partners in their
capital contribution ratio (fixed or fluctuating capitals) [Deed is silent]
Indian Partnership Act, 1932

As per the Indian Partnership Act, 1932, the deficiency of the insolvent partner is shared as follows:
1. The loss on Realization shall be shared between all the partners (including the insolvent
partner) in their profit-sharing ratio.
2. The deficiency of the insolvent partner shall be taken over by the solvent partners in their
capital contribution ratio (fixed or fluctuating capitals)
Note: As per Indian Partnership Act, the solvent partners shall not bring in cash, their share of loss on
Realization.
Question 32: Dissolution of Firms (Single Partner Insolvent and Profit on Realization):
Balance Sheet As At 31st March, 1995
Liabilities
Capital Accounts:
Assets
Land
50,000
F.Kapil
200,000
Buildings
250,000
S.Kapil
200,000
Office Equipment
125,000
R.Dev
100,000
500,000 Computers
Current Accounts:
F.Kapil
50,000
S.Kapil
150,000
R.Dev
110,000
Loan from NBFC

Current Liabilites
Debtors
400,000
Stocks
300,000
Cash at Bank
310,000 Other Current Assets
75,000
22,600
500,000 Current A/c

70,000
1380,000
70,000
B.Dev
87,400
1380,000
6.3.4
The partners have been sharing profits and losses in the ratio of 4:4:1:1. It has been agreed to dissolve
the firm on 1.4.1995 on the basis of the following understanding:
a. The following assets are to be adjusted to the extent indicated with respect to the book values:
Land
200%
Buildings 120%
Computers 70%
Debtors
95%
Stocks
90%
b. In the case of loan, the lenders are to be paid at a prepayment premium of 1%.
c. B. Dev is insolvent and no amount is recoverable from him. His father, R. Dev however, agrees to
bear 50% of his deficiency. The balance of the deficiency is agreed to be apportioned according to
law.
Assuming that the realization of the assets and discharged of liabilities is carried out immediately
show the Cash A/c, Realization Account and the partners Accounts.
Answer: In the books of M/s Kapil and Dev
Cash A/c (Bank Column)
Particular
To Balance b/d
Particular
75,000 By Realization A/c (S. Liabilities)
Realization A/c (S. Assets) 12,46,600
5,75,000
Partners capital A/cs:

F. Kapil
2,42,600
S.Kapil
3,42,600
R.Dev
1,61,400
13,21,600
13,21,600
Realization A/c
Particular
To Land
Particular
50,000 By Current Liabilities
Building
2,50,000
Loan from NBFC
Office equipments
1,25,000
Cash A/c:
Computers
70,000
70,000
5,00,000
Land
1,00,000
Debtors
4,00,000
Buildings
3,00,000
Stocks
3,00,000
Office Equipment
1,25,000
Other Current Assets
22,600
Cash A/c:
Current Liabilities
70,000
Loan from NBFC
5,05,000
5,75,000
Computers
49,000
Debtors
3,80,000
Stock
2,70,000
Other current assets
22,600 12,46,600
6.3.5
Partners Current A/c:

Profit on realization:
F.Kapil
9,600
S.Kapil
9,600
R.Dev
2,400
B.Dev
2,400
24,000
18,16,600
18,16,600
Partners Current A/c [ in thousands]

Particular
By
Balance b/d
Partners Capital
F.K
S.K
R.D
B.D
Particular
F.K
To
- 87.4 Balance b/d
59.6 159.6 112.4
Realization
59.6 159.6 112.4 87.4
B.D A/c
Cash A/c
17.0
17.0
9.6
2.4
2.4
- 85.0
200.0 200.0 100.0
- Current A/c
242.6 342.6 161.4
9.6
B.D
59.6 159.6 112.4 87.4
Capital A/c
- 85.0 Balance b/d
51
R.D
50.0 150.0 110.0
Partners Capital
Current A/c
S.K
- F. K
59.6 159.6 112.4
S. K1
R.DA/c
259.6 359.6 212.4 85.0
- 17.0
- 17.0
- 51.5
259.6 359.6 212.4 85.0
Question 33: Dissolution of Firm (Garner Vs Murray)

Neptune, Jupiter, Venus and Pluto had been carrying on business in partnership sharing profits
and losses in the ratio of 3 : 2 : 1 : 1. They decide to dissolve the partnership on the basis of the
following Balance Sheet as on 30 th April, 2003:
Liabilities
Capital A/c
Neptune
Jupiter
General Reserve
100,000
60,000
Assets
Premises
Furniture
160,000 Stock
56,000 Debtors
120,000
40,000
100,000
40,000
F. Kapil S. Kapil
First 50% of loss
R. Dev
S. Dev
42.5 Dr 42.5 Cr
Second 50% of loss
17 Dr
17 Dr
8.5 Dr 42.5 Cr
Total
17 Dr
17 Dr
51 Dr 85.0 Cr
6.3.6
Capital Reserve
Sundry Creditors
Mortgage Loan
14,000 Cash
20,000 Capital Overdrawn:
80,000 Venus
10,000
Pluto
12,000
3,30,000
8,000
22,000
3,30,000
1. The assets were realised as under:

Particulars
Debtors
Stock
Furniture
Premises
2. Expenses of dissolution amounted to 4,000.
24,000
60,000
16,000
90,000
3. Further Creditors of 12,000 had to be met.

4. General Reserve unlike Capital Reserve was built up by appropriation of profits.
You are required to draw up the Realization A/c, Partners Capital Accounts and the Cash
Account assuming that Venus became insolvent and nothing was realised from his private estate.
Apply the principles laid down in Garner vs. Murray.
Answer:
Realization A/c
Particulars
Particulars
To Sundry assets A/c (transfer):
By Sundry creditors A/c
Premises
1,20,000
Mortgage Loan
Furniture
40,000
Cash A/c (assets sold):
Stock
1,00,000
Premises
Sundry Debtors
40,000
Furniture
Cash A/c (creditors paid)
32,000
Stock
Cash A/c (loan paid)
80,000
Debtors
Cash A/c (expenses)
4,000
Loss transferred to
Capital Accounts:
Neptune
Jupiter
Venus
Pluto
4,16,000
Particulars
To Balance b/d
To Realization A/c
(assets realised)
To Capital A/c
(Realization loss)
Neptune
Jupiter
Pluto
To Pluto's Capital A/c
Cash A/c
8,000 By
By
1,90,000 By
By
By
54,000
36,000
18,000 1,08,000
2,000
3,08,000
20,000
80,000
90,000
16,000
60,000
24,000 1,90,000
54,000
36,000
18,000
18,000 1,26,000
4,16,000
Particulars
Realization A/c (creditors)

32,000
Realization A/c (expenses)
4,000
Mortgage loan
80,000
Neptune's Capital A/c
1,18,857
Jupiter's Capital A/c
73,143
3,08,000
6.3.7

Particulars
Neptune
Jupiter
Venus
Pluto
To
Particulars
Neptune
Jupiter
Venus
Pluto
1,00,000
60,000
By
Balance b/d
10,000
12,000
Balance b/d
Realisation
54,000
36,000
18,000
18,000
GR
24,000
16,000
8,000
8,000
V's Capital
11,143
6,857
CR
6,000
4,000
2,000
2,000
1,18,857
73,143
Cash A/c
54,000
36,000
18,000
N's Capital
11,143
J's Capital
6,857
Cash A/c
2,000
1,84,000
1,16,000
28,000
30,000
Cash A/c
1,84,000
1,16,000
28,000
30,000
Question 34: Dissolution of firm [All are insolvent]: A, B and C are equal partners, B/S Dec 31,
2002
Balance Sheet
Liabilities
Assets
Sundry Creditors
5,000 Cash in hand
As Loan
1,000 Stock
Capital A/cs:
50
800
Debtors
1,000
800 Plant & Mach.,
2,000
500 Furniture & Fittings

Land & Buildings
Bs Capital (overdrawn)
7,300
800
2,000
650
7,300
Due to lack of liquidity and weak financial position of the partners, the firm is dissolved. A and C are
not able to contribute anything and a sum of 200 received from B. All of them are declared
insolvent. The assets are realised: Stock 500; Plant and Machinery 1,000; Furniture and Fittings
200; Land & Buildings 800; and Debtors 550 only. Realization expenses amounted to 50. You
are required to close the firms books.
Answer:
Realization A/c
Particulars
Particulars
To Stock A/c
800 By Cash A/c:
Debtors A/c
1,000
Stock
Plant & Mach. A/c
2,000
Plant & Machinery
Furniture & Fittings A/c
800
Furniture & Fittings
Land & Buildings A/c
2,000
Land & Buildings
Cash A/c (realization exp.,)
50
Debtors
Partners Capital
6,650
500
1,000
200
800
550 3,050
3,600
6,650
6.3.8
Cash A/c
Particulars
To To Bal. b/d
50 By By Realization A/c (expenses)
50
To Realization A/c (assets realised) 3.050
By Creditors A/c (final payment) 3,250
To B Capital A/cs
200
3,300
3,300
Particulars
Sundry Creditors A/c

To To Cash A/c (payment) 3,250 By Balance b/d
To Deficiency A/c
1,750
5,000
Bs Capital A/c
Cs Capital A/c
To
Particulars
A
To Balance b/d
-Realization A/c (loss) 1,200
Deficiency A/c
600
1,800
5,000
5,000
Deficiency A/c
1,650 By Sundry Creditors A/c 1,750
700
As Capital A/c
600
2,350
2,350

B
C
Particulars
A
B
C
650
-- By Balance b/d
800
-500
1,200 1,200
Cash A/c
-200
-(final dividend)
--A Loan A/c
1,000
--Deficiency A/c
-- 1,650
700
1,850 1,200
1,800 1,850 1,200
Piecemeal Distribution: represents the process of Pay as and when you realize strategy.
Two methods of piecemeal distribution
(1) Highest Relative Capital Method or Proportionate Capital Method or Absolute Surplus Capital
Method.
(2) Maximum Loss Method.
Question 35: Piecemeal Distribution [Capital Proportionate Method / Maximum Loss Method]:
A, B and C are partners share profit and loss in the ratio of 5:3:2. Their capital balance of A, B and C
as on the date of dissolution are 12,000, 3,000 and 5,000. The assets realized after paying liabilities as
4,000, 5,000 3,000 and 3,000 in I, II, III and IV realization. From the given information prepare a
statement of distribution of realizable amount under (a) capital proportionate method (b) maximum
loss method
Answer:
Ratio
Partners
Capital
Capital per share
Capital Proportionate Method

Order of payment
5
3
2
A
B
C
12000 3000 5000
2400 1000 2500
Ratio
6.3.9
Capital requirement based on lowest Share

Excess
Capital per share
Capital requirement based on lowest Share
Excess
5000 3000 2000

7000
--- 3000
1400
1500
7000
2800
-200
III A, B & C
[5:3:2]
II A & C
I C only
[5:2]
Full
Cash Distribution under Capital Proportionate Method

Partners
A
B
Opening Balance
12000 3000
I Realization 4000
200
3800 2714
Balance after I Realization
9286 3000
II Realization 5000 [A and C 5:2 Ratio]
3571
--Balance after II Realization
5715 3000
III Realization 3000 [A, and C]
1000
715
[A, B and C]
2000 1000 600
Balance after III Realization
4000 2400
IV Realization 3000
1500 900
Deficiency
2500 1500
C
5000
200
1086
3714
1429
2285
285
400
1600
600
1000
Maximum Loss Method

Capital
Less Maximum loss after I Realization (20,000 4,000)
(distributed in profit and loss ratio)
Total
A
20000 12000
16000 8000
4000
Adjustment of Bs Loss in capital ratio to A&C [12:5]
Cash Paid out of I Realization
4000
Balance after I Realization
16000
Less Maximum Loss after II Realization (16,000 5,000)
11000
5000
Adjustment of Bs Loss in Capital Ratio
300
Cash Paid out of II Realization
5000
Balance after II Realization
11000
Less Maximum Loss after III Realization (11,000 3,000)
8000
Cash paid out of III Realization
3000
Balance after III Realization
8000
Less Maximum Loss after IV Realization (8,000 3,000)
5000
Cash Paid out of IV Realization
3000
Deficiency
5000
+/
B
C
3000 5000
4800 3200
4000 -1800 1800

-1270 1800 -530
2730
-- 1270
9270 3000 3730
5500 3300 2200
3770 -300 1530
-211
300
-89
3559
-- 1441
5711 3000 2289
4000 2400 1600
1711
600 689
4000 2400 1600
2500 1500 1000
1500
900 600
2500 1500 1000
[CA INTER N95][CMA RTP D11 & J11]

Question 36: Piecemeal Distribution for Dissolution of Firm (Capital Proportionate Method)
Balance Sheet
Liabilities
Assets
Creditors
2,00,000 Fixed Assets
Bank Loan
5,00,000 Cash and Bank
45,00,000
2,00,000
6.3.10
Ls Loan
10,00,000
Capital
L
15,00,000
10,00,000
5,00,000
Total
47,00,000
47,00,000
Partners share profits equally. A firm of Chartered Accountants is retained to realise the assets and
distribute the cash after discharge of liabilities. Their fees which are to include all expenses are fixed
at 100,000. No loss is expected on Realization since fixed assets include valuable land and building.
Realizations are:
Installments
Amount in
I [including cash]
5,00,000
II
15,00,000
III
15,00,000
IV
30,00,000
30,00,000
The Chartered Accountant firm decided to pay off the partners in Higher Relative Capital Method.
You are required to prepare a statement showing distribution of cash with necessary workings.
Answer:
Statement of Piecemeal Distribution (Under Higher Relative Capital method) [ in 000]
Particulars
Amt
Crs
Bank
Avail
Balance due
Ls
Capital A/c
Loan
200.0
500.0
1000 1500.0 1000.0
500.0
400 114.3
285.7
85.7
214.3
300
85.7
214.3
1000
1000
200
200.0
- 1300.0 1000.0
500.0
1500
300
Installment I (less liquidator expenses

& fees) [500 100]
- Payment to creditors and bank loan
[Ratio 2:5]
Balance Due after Installment I
Installment II
-
Payment to Creditors and bank loan

in full settlement
Repayment of Ls Loan
Payment to L towards relative higher
capital (W.N.1)
Payment to L towards higher relative
1000 1500.0 1000.0
500.0
1500
Balance due after installment II

Installment III
300.0
6.3.11
capital (WN2)
Payment to L & M towards excess
capital (WN 1&2)
-
Payment to all the partners equally
1000
500.0
500.0
200
66.7
66.7
66.6
433.3
433.3
433.4
- 1000.0 1000.0 1000.0
- 1000.0 1000.0 1000.0
- 1566.7 1566.7 1566.6
Balance due after Installment IV

- Installment IV: Equal pay to all
partners
3000
Realization of profit credited to

Partners
- 5th Installment: Equal pay to all
partners
3000
Realization profit credited to partners
566.7
566.7
566.6
Working Notes:
Scheme of payment of surplus amount of 200,000 out of second Installment: So Mr. L should
get 5,00,000 first which will bring down his capital account balance from 15,00,000 to
10,00,000. Accordingly, surplus amounting to 2,00,000 will be paid to Mr. L towards higher
relative capital.
Scheme of payment of 15,00,000 realised in 3rd Installment:
i.
ii.
Payment of 300,000 will be made to Mr. L to discharge higher relative capital. This makes the
higher capital of both Mr. L and Mr. M 500,000 as compared to capital of Mr. S.
Payment of 500,000 each of Mr. L & Mr. M to discharge the higher capital.
Balance 200,000 equally to L, M and S, i.e., 66,667, 66,667 and 66,666 respectively.
Payment
Capital Proportionate Method

Partners
Profit sharing ratio (i)
Capital Balance (ii)
15,00,000 10,00,000 5,00,000
Capital per share (ii/i)
15,00,000 10,00,000 5,00,000
Capital required taking Ss Capital (iii)
5,00,000
Order
5,00,000 5,00,000 III [L, M & S]
Excess Capital (iv) = (ii) (iii)
10,00,000
5,00,000
Excess Capital per share (iv/i)
5,00,000
5,00,000
Capital required taking Ms Capital (v)
5,00,000
5,00,000
Higher Relative Excess v = (iv) (iv)
5,00,000
Ratio
1:1:1
II [L & M]
1:1
I [L]
Full
[CA INTER N99][CMA INTER D02, 8 Marks]

Question 37: Dissolution of Firm (Piecemeal Distribution: Maximum Loss Method): A, B and C
are partners sharing profits and losses in the ratio of 5:3:2. Their capitals were 9,600, 6,000 and
8,400 respectively. After paying creditors, the liabilities and assets of the firm were:
6.3.12
Liability
Liability for loans from :
Assets
Investments
1,000
Spouses of partners
2,000 Furniture
2,000
Partners
1,000 Machinery
1,200
Stock
4,000
The assets realized in full in the order in which they are listed above, B is insolvent. You are required
to prepare a statement showing the distribution of cash as and when available, applying maximum
possible loss procedure.
Answer:
Statement of Distribution of Cash
Realization
Partners Capitals
Loan
Spouse partners
Balances due
i.
6,000
8,400
1,000
1,000
9,600
6,000
8,400
1,000
1,000
9,600
6,000
8,400
Maximum loss 22,800 (Total Due

24,000 - cash available 1,200)
allocated to partners [P/L ratio i.e. 5 :
3 : 2]
11,400
6,840
4,560
Amounts at credit
(1,800)
(840)
3,840
1,800
840
3,640
1,200
9,600
6,000
7,200
1,000
Sale of furniture
2,000
Balance after furniture

iii. Sale of machinery
Amount paid
Balances in capital accounts
Sale of stock
Maximum possible loss 18,800
(22,800 4,000) Allocated to partners
in the ratio 5 : 3 : 2
Amounts at credit and cash paid
Balances in capital accounts left
unpaidLoss
1,000
1,200
Deficiency of A and B written off

against C [CR]
iv.
9,600
Balance after investment

ii.
1,000
Sale of investments
2,000
4,000
(9,400) (5,640) (3,760)
200
360
3,440
9,400
5,640
3,760
6.3.13
ADDITIONAL PROBLEMS
DISSOLUTION OF A PARTNER
[CMA INTER D07, 5+2+5=12 Marks]
Question: Dissolution: ASHA, REKHA, and ASHOK are partners sharing Profits and Losses in the
ratio of 5:3:2 respectively. On March 31, 2007 they decided to dissolve the partnership firm and on
that date their Balance Sheet was as follows:
Liabilities
Capital :
Asha
96,000
Ashok
84,000 1,80,000
General Reserve
24,000
Creditors
72,000
Bills Payable
24,000
Mrs.Ashoks Loan
12,000
Investment Fluctuation Fund
6,000
Assets
Cash at Bank
Debtors
50,400
Less : Provision
2,400
Rekhas Cpital
Land & Building
Stock
Furniture
Bills Receivable
Investments
3,18,000
12,000
48,000
12,000
96,000
54,000
36,000
30,000
30,000
3,18,000
The terms of dissolution are as follows:

a) 22,800 were paid to a Creditor as against only 15,600 provided for in the books of Accounts
b) There was a bad debt of 8,400 and discount of 10% was allowed to Debtors.
c) Bills payable were due on an average after 3 months were paid immediately at a discount of 12%
p.a.
d) Investment realized 26,400; Land and Building was sold for 1,20,000, Stock realized 20% less.
e) Ashok agreed to pay Mrs. Ashoks loan and took over furniture at 33,600
f) A rebate of 1,200 was given to Bills Receivable and Expenses of dissolution were 3,600 which
were paid by Rekha.
Prepare Realisation Account, Bank Account and Partners Capital Account to close the books of firm.
Answer:
Realisation A/c
Particulars
Amount
Particulars
Amount
To Debtors A/c
50,400 By Provision A/c
2,400
Land & Building
96,000
Creditors A/c (72,000 +
79,200
A/c
7,200)
Stock A/c
54,000
Bills Payable A/c
24,000
Furniture A/c
36,000
Mrs.Ashok loan A/c
12,000
Bills Receivable
30,000
Investment
Fluctuation
6,000
A/c
Fund A/c
Investment A/c
30,000
Ashok Capital A/c
33,600
Cash A/c
Cash A/c
Creditors
79,200
Debtors
35,640
Bills Payable
21,120
Investment
26,400
Expenses
3,600 1,03,920
Land & Building
1,20,000
Ashok Capital A/c
12,000
Stock
43,200
6.3.14
Bills Receivable
Partner Capital A/c
Asha
Ashok
Rekha
28,800 2,54,040
540
324
216
4,12,320
Asha
96,000
12,000
Ashok Rekha
84,000
7,200 4,800
33,600

Ashok Rekha
Particulars
-12,000 By Balance c/d
2,160 1,440
General
Reserve A/c
--Realisation A/c
12,000
--
540
324
--
--
82,260
88,716 --
Particulars
Asha
To Balance
-Creditors A/c 3,600
Realisation
A/c
Realisation
A/c
Cash A/c
1,080
4,12,320
216
1,20,000 91,200 13,656
Cash A/c
8,856
1,20,000 91,200 13,656
Cash A/c
Particulars
Amount
Particulars
Amount
To Balance b/d
12,000 By Realisation A/c
1,03,920
Realisation A/c
2,54,040
Partner Capital A/c
Rekha Partner Capital A/c
8,856
Asha Capital
82,260
Ashok Capital
88,716 1,70,976
2,74,896
2,74,896
6.3.15

G1 6.3 Partnership - Dissolution

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6.

Sundry Creditors A/c Dr. Dr 12,000

Bank A/c Dr.

Realization A/c Dr.

Realization A/c Dr.

31,000 By Sundry Creditors. A/c

Bank A/c (assets realised)

B Capital A/c (furniture taken over)

Bank A/c (sundry creditors) 12,000

Partners Capital A/cs (loss):

Bank A/c (expenses)

Partners Capital A/c

20,000 10,000 2,350

4,00,000 Stock in trade

3,00,000 Sundry debtors

2,00,000 Cash in hand

Y (Stock taken over)

Capital a/c (Loss)

Partners Capital A/c

10,000 By Realization A/c (Expenses)

Realization A/c (Creditors)

(Fixed assets and

book debts realized)

[CMA INTER J09, 4 Marks]

Indian Partnership Act, 1932

Loan from NBFC

500,000 Current A/c

75,000 By Realization A/c (S. Liabilities)

Realization A/c (S. Assets) 12,46,600

Partners capital A/cs:

50,000 By Current Liabilities

Loan from NBFC

Other Current Assets

Loan from NBFC

Other current assets

Partners Current A/c:

Partners Current A/c [ in thousands]

59.6 159.6 112.4

59.6 159.6 112.4 87.4

200.0 200.0 100.0

242.6 342.6 161.4

59.6 159.6 112.4 87.4

50.0 150.0 110.0

59.6 159.6 112.4

259.6 359.6 212.4 85.0

259.6 359.6 212.4 85.0

Question 33: Dissolution of Firm (Garner Vs Murray)

Second 50% of loss

1. The assets were realised as under:

3. Further Creditors of 12,000 had to be met.

Realization A/c (creditors)

Partners Capital A/c

5,000 Cash in hand

800 Plant & Mach.,

500 Furniture & Fittings

Sundry Creditors A/c

Partners Capital A/c

Capital Proportionate Method

Capital requirement based on lowest Share

5000 3000 2000

Cash Distribution under Capital Proportionate Method

Maximum Loss Method

4000 -1800 1800