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Dissolution of a Partnership Firm 6.5
Illustration 2.
Following is the Balance Sheet as at 31st March, 2019 of Antony, Birdy and Costello
carrying on business in partnership sharing profits and losses in the ratio of 2 : 2 : 1:

Liabilities ` Assets `
Capital A/cs: Fixed Assets 7,00,000
Antony 4,00,000 Sundry Debtors 3,00,000
Birdy 2,50,000 6,50,000 Stock 1,00,000
Mortgage Loan 4,00,000 Cash at Bank 50,000
Reserve 60,000 Costello’s Capital A/c 60,000
Sundry Creditors 1,00,000
12,10,000 12,10,000
They decided to dissolve the partnership and the following arrangements were agreed upon:
(i) Fixed assets included:
(a) Motor Car ` 55,000 taken over by Birdy at an agreed value of ` 90,000 after the
repairing costs amounted to ` 20,000 to be borne by the firm.
(b) Land and Building ` 5,00,000 subject to the mortgage loan, taken by Antony
at an agreed value of ` 6,00,000 subject to the mortgage loan to be taken over
at ` 4,00,000.
(ii) Other assets (excluding Cash at Bank) and Creditors are taken over by Piyush Limited
in consideration of issue of 5,000 Equity Shares of ` 100 each fully paid. These shares
are taken at a total agreed value of ` 4,80,000 equally by Antony and Birdy.

(iii) Creditors for ` 25,000 not provided for in the books had to be paid.
Prepare Realisation Account, Partners’ Capital Accounts and Bank Account assuming
that the final settlement was made by the partners bringing in the amounts due
from them.
Solution:

Dr. REALISATION ACCOUNT Cr.
Particulars ` Particulars `
To Fixed Assets A/c 7,00,000 By Mortgage Loan A/c 4,00,000
To Sundry Debtors A/c 3,00,000 By Sundry Creditors A/c 1,00,000
To Stock A/c 1,00,000 By Birdy’s Capital A/c (Motor Car) 90,000
To Bank A/c (Repair of Car) 20,000 By Antony’s Capital A/c 6,00,000
To Bank A/c (Creditors) 25,000 (Land and Building)
To Antony’s Capital A/c (Mortgage Loan) 4,00,000 By Shares in Piyush Limited A/c 5,00,000
To Shares in Piyush Limited A/c (Loss) 20,000 (5,000 × ` 100)
(` 5,00,000 – ` 4,80,000)
To Gain (Profit) on Realisation transferred to:
Antony’s Capital A/c 50,000
Birdy’s Capital A/c 50,000
Costello’s Capital A/c 25,000 1,25,000
16,90,000 16,90,000