[OR alternative to Q15] A, B and C are partners in a firm and share profits and losses equally. They dissolved the firm on 31st March, 2016. On this date the Balance Sheet was as under:
| Liabilities | Amount ₹ | Assets | Amount ₹ |
|---|---|---|---|
| Creditors | 60,000 | Fixed Assets | 1,00,000 |
| Capital: A 30,000, B 30,000, C 30,000 | 90,000 | Current Assets | 40,000 |
| Cash | 10,000 | ||
| Total | 1,50,000 | Total | 1,50,000 |
10% less than book value from assets was realised. Creditors were paid in full. Dissolution expenses amounted to ₹500 which were paid in cash. An amount of ₹500 was paid for contingent liabilities for which no provision was made in the books of accounts. Prepare necessary Accounts.
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Start your 14-day free trial to unlock the full solution →Assets realise ₹1,26,000 (90% of book value ₹1,40,000); after paying creditors, dissolution expenses and an unrecorded contingent liability, a realisation loss of ₹15,000 is shared equally, and each partner finally receives ₹25,000.
Facts: A, B, C share profits equally. Balance Sheet on dissolution — Creditors ₹60,000, Capitals A/B/C ₹30,000 each; Fixed Assets ₹1,00,000, Current Assets ₹40,000, Cash ₹10,000. Assets (other than cash) realise 10% less than book value; Creditors paid in full; Dissolution expenses ₹500 paid in cash; a further ₹500 paid for a contingent liability not provided for in the books.
Step 1 — Realisation Account:
| Dr | Amount (₹) | Cr | Amount (₹) |
|---|---|---|---|
| To Fixed Assets A/c | 1,00,000 | By Creditors A/c | 60,000 |
| To Current Assets A/c | 40,000 | By Bank A/c (Assets realised, 90% of 1,40,000) | 1,26,000 |
| To Bank A/c (Creditors paid) | 60,000 | ||
| To Bank A/c (Dissolution expenses) | 500 | ||
| To Bank A/c (Contingent liability paid) | 500 | ||
| By Loss on Realisation transferred to Capital A/cs: | |||
| A, B, C (₹5,000 each) | 15,000 | ||
| Total | 2,01,000 | Total | 2,01,000 |
Loss on Realisation = (1,00,000 + 40,000 + 60,000 + 500 + 500) − (60,000 + 1,26,000) = 2,01,000 − 1,86,000 = ₹15,000, shared equally = ₹5,000 each.
Step 2 — Partners' Capital Accounts:
| Particulars | A (₹) | B (₹) | C (₹) |
|---|---|---|---| …
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