(a) A and B are partners sharing profits and losses equally. On 31st March, 2021, they decided to dissolve their firm. On the date of dissolution, their Balance Sheet was as under :
Balance Sheet of A and B as at 31st March, 2021
| Liabilities | Amount ₹ | Assets | Amount ₹ |
|---|---|---|---|
| Creditors | 3,00,000 | Bank | 3,00,000 |
| A's Loan | 60,000 | Stock | 2,40,000 |
| Mrs. A's Loan | 70,000 | Furniture | 2,00,000 |
| Capitals : A 2,30,000 | Plant and Machinery | 1,00,000 | |
| B 2,30,000 | 4,60,000 | Profit and Loss A/c | 50,000 |
| 8,90,000 | 8,90,000 |
The assets were realised and liabilities were paid as under : (i) Creditors were paid at 20% less. (ii) Furniture was taken over by A for ₹ 1,80,000 and Plant and Machinery was sold for ₹ 80,000. (iii) B took over the stock at ₹ 1,80,000. (iv) A promised to pay Mrs. A's loan. (v) Realisation expenses of ₹ 20,000 were paid by B. Prepare Realisation Account.
OR
(b) Vidit, Vinay and Siya were partners in a firm. On 31st March, 2021, their Balance Sheet was as follows :
Balance Sheet of Vidit, Vinay and Siya as at 31st March, 2021
| Liabilities | Amount ₹ | Assets | Amount ₹ |
|---|---|---|---|
| Creditors | 72,000 | Cash | 28,000 |
| Bank Loan | 18,000 | Stock | 46,000 |
| General Reserve | 18,000 | Debtors | 34,000 |
| Capitals : | Building | 30,000 | |
| Vidit 48,000 | Plant and Machinery | 66,000 | |
| Vinay 16,000 | |||
| Siya 32,000 | 96,000 | ||
| 2,04,000 | 2,04,000 |
On the above date, Vinay retired and it was agreed that : (i) The value of stock will be reduced by ₹ 10,000. (ii) Plant and Machinery will be valued at ₹ 80,000. (iii) An amount of ₹ 4,500 included in creditors is not likely to be claimed. (iv) Debtors to be valued at ₹ 30,000. (v) Amount due to Vinay will be transferred to Vinay's Loan Account. Prepare Revaluation Account and Vinay's Capital Account.
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Start your 14-day free trial to unlock the full solution →(a) On dissolution, the Realisation Account of A and B shows a loss of ₹60,000, shared equally (₹30,000 each).
(b) On Vinay's retirement, the Revaluation Account shows a profit of ₹4,500 (₹1,500 each) and the amount due to Vinay of ₹23,500 is transferred to his Loan Account.
Part (a)
On dissolution, a Realisation Account records the transfer of assets and outside liabilities at book value, the amounts actually realised/paid, realisation expenses, and finally the profit or loss (shared in the profit-sharing ratio). Cash/Bank and accumulated profit (P&L A/c) are not transferred to Realisation; a partner's loan (A's Loan) is settled separately.
Adjustments:
- Creditors (₹3,00,000) paid at 20% less = 3,00,000 × 0.80 = ₹2,40,000.
- Furniture taken over by A for ₹1,80,000; Plant & Machinery sold for ₹80,000; Stock taken by B for ₹1,80,000.
- Mrs. A's Loan (₹70,000) taken over/paid by A → debited to A's Capital.
- Realisation expenses ₹20,000 paid by B → credited to B's Capital.
Realisation Account
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---|---|---|
| To Stock A/c | 2,40,000 | By Creditors A/c | 3,00,000 |
| To Furniture A/c | 2,00,000 | By Mrs. A's Loan A/c | 70,000 |
| To Plant and Machinery A/c | 1,00,000 | By Bank A/c (P&M sold) | 80,000 |
| To Bank A/c (Creditors paid) | 2,40,000 | By A's Capital A/c (Furniture) | 1,80,000 |
| To A's Capital A/c (Mrs. A's Loan) | 70,000 | By B's Capital A/c (Stock) | 1,80,000 |
| To B's Capital A/c (Realisation exp.) | 20,000 | By Loss — A 30,000; B 30,000 | 60,000 |
| Total | 8,70,000 | Total | 8,70,000 |
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