Hema, Manisha and Limsy were in partnership firm sharing profits and losses in the ratio of 5:3:2. They decided to dissolve their partnership firm on 31
st
March 2019 and their Balance sheet as on that date stood as:
| Balance sheet as on 31st March,2019 | |||
|---|---|---|---|
| Liabilities | Amount ₹ | Assets | Amount ₹ |
| Capital Account: | Machinery | 1,00,000 | |
| Hema | 1,50,000 | Debtors | 50,000 |
| Manisha | 80,000 | Stock | 70,000 |
| Reserve Fund | 10,000 | Cash at Bank | 30,000 |
| Sundry Creditors | 20,000 | Limsy Capital A/c | 20,000 |
| Bills payable | 10,000 | ||
| 2,70,000 | 2,70,000 | ||
| The firm was dissolved on 31 | |||
| st | |||
| March, 2019 and assets were realised as under: | |||
| Machinery realised 60% of its book value. | |||
| Out of debtors, Mr. Jagdish, our customer for ₹ 20,000 was declared insolvent and nothing could be recovered from him. Other debtors are good and recovered and realised. | |||
| Hema took stock at an agreed value of ₹ 50,000. | |||
| Creditors and Bills payable were paid at 10% discount. | |||
| Limsy became insolvent and nothing was recovered from her estate. | |||
| Prepare: | |||
| Realisation Account | |||
| Partners’ Capital Account | |||
| Bank Account |
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Start your 14-day free trial to unlock the full solution →Transfer assets to the Realisation A/c at book value; machinery realises 60% (₹60,000), good debtors ₹30,000 (Jagdish ₹20,000 bad), Hema takes stock at ₹50,000, and creditors + bills payable are paid at 10% discount. Realisation shows a loss of ₹77,000 (5:3:2). Reserve Fund ₹10,000 is shared 5:3:2. Limsy's account shows a debit deficiency of ₹33,400 which, as she is insolvent, is borne by Hema and Manisha in 5:3. Hema is paid ₹45,625 and Manisha ₹47,375; the Bank Account balances at ₹1,20,000.
Working Note 1 — realisation of assets and settlement of liabilities
| Item | Book value ₹ | Realised / settled ₹ |
|---|---|---|
| Machinery (60% of 1,00,000) | 1,00,000 | 60,000 (cash) |
| Debtors (Jagdish 20,000 bad; balance 30,000 good) | 50,000 | 30,000 (cash) |
| Stock (taken over by Hema) | 70,000 | 50,000 (to Hema's Capital) |
| Sundry Creditors (less 10% discount) | 20,000 | 18,000 (cash paid) |
| Bills Payable (less 10% discount) | 10,000 | 9,000 (cash paid) |
Realisation Account
| Dr — Particulars | ₹ | Cr — Particulars | ₹ |
|---|---|---|---|
| To Machinery A/c | 1,00,000 | By Sundry Creditors A/c | 20,000 |
| To Debtors A/c | 50,000 | By Bills Payable A/c | 10,000 |
| To Stock A/c | 70,000 | By Bank A/c (Machinery) | 60,000 |
| To Bank A/c (Creditors paid) | 18,000 | By Bank A/c (Debtors) | 30,000 |
| To Bank A/c (Bills Payable paid) | 9,000 | By Hema's Capital A/c (Stock) | 50,000 |
| By Loss transferred to Capital A/cs: | |||
| Hema 38,500 | |||
| Manisha 23,100 | |||
| Limsy 15,400 | 77,000 | ||
| Total | 2,47,000 | Total | 2,47,000 |
Loss on realisation ₹77,000, shared 5:3:2 → Hema ₹38,500, Manisha ₹23,100, Limsy ₹15,400.
Working Note 2 — Reserve Fund ₹10,000 shared 5:3:2 → Hema ₹5,000, Manisha ₹3,000, Limsy ₹2,000.
Partners' Capital Account
| Particulars | Hema ₹ | Manisha ₹ | Limsy ₹ | Particulars | Hema ₹ | Manisha ₹ | Limsy ₹ |
|---|---|---|---|---|---|---|---|
| To Balance b/d | — | — | 20,000 | By Balance b/d | 1,50,000 | 80,000 | — |
| To Realisation A/c (loss) | 38,500 | 23,100 | 15,400 | By Reserve Fund | 5,000 | 3,000 | 2,000 |
| To Realisation A/c (Stock) | 50,000 | — | — | By Hema's & Manisha's Capital (deficiency) | — | — | 33,400 |
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