Page 129 - ISCDEBK-12

Dissolution of a Partnership Firm 6.3

Payment of an unrecorded liability (which Realisation A/c ...Dr. Paid amount
does not exist in the Balance Sheet) To Cash/Bank A/c
Payment of realisation expenses by Realisation A/c ...Dr. Amount of payment
any partner To Partner’s Capital A/c
Credit balance of Realisation Account Realisation A/c ...Dr. In profit-sharing ratio
(Gain or Profit) To Partners’ Capital A/cs
Debit balance of Realisation Account Partners’ Capital A/cs ...Dr. In profit-sharing ratio
(Loss) To Realisation A/c

Notes:

1. When an asset or liability is taken to the Realisation Account any related fund or reserve is also transferred
to Realisation Account and not to Partners’ Capital Accounts.
2. If the question is silent about the realisation of an asset, its value is assumed to be nil.
3. If the question is silent about the payment of a liability, then it has to be paid out in full.
4. Bank overdraft is taken to the Bank/Cash A/c and not transferred to Realisation Account but bank loan is
transferred to Realisation Account.
5. Loan taken from a partner is passed through Cash or Bank Account.
6. Loan given to a partner is transferred (debited) to his Capital Account.

Solved Questions

Illustration 1.
Following is the Balance Sheet of Amrit and Bose as at 31st March, 2020:
Liabilities ` Assets `

Sundry Creditors 3,00,000 Cash in Hand 5,000
Bills Payable 80,000 Cash at Bank 80,000
Mrs. Amrit’s Loan 50,000 Stock-in-Trade 50,000
Mrs. Bose’s Loan 1,00,000 Investments 1,00,000
General Reserve 1,00,000 Debtors 2,00,000
Machinery Replacement Reserve 10,000 Less: Provision for Doubtful Debts 20,000 1,80,000
Capital A/cs: Plant and Machinery 2,00,000
Amrit 1,00,000 Building 1,50,000
Bose 1,00,000 2,00,000 Goodwill 40,000
Profit and Loss A/c 35,000
8,40,000 8,40,000

The firm was dissolved on 31st March, 2020. On dissolution:
(i) Amrit promised to pay Mrs. Amrit’s loan and took Stock-in-Trade at ` 40,000.
(ii) Bose took half the Investments at Book Value less 10%.
(iii) Debtors realised ` 1,90,000.
(iv) Creditors and Bills Payable were due on an average basis of one month after
31st March, but they were paid immediately on 31st March @ 6% p.a. discount.