Page 134 - ISCDEBK-12

6.8 Double Entry Book Keeping (Section A)—ISC XII

Illustration 4.
Prakash, Kiran and Rishab are partners in a firm sharing profits and losses in the ratio
of 3 : 2 : 1. Their Balance Sheet as at 31st March, 2020 stood as follows:
BALANCE SHEET as at 31st March, 2020
Liabilities ` Assets `
Creditors 25,000 Cash at Bank 2,000
Bills Payable 10,000 Debtors 20,000
General Reserve 27,000 Less: Provision for Doubtful Debts 2,000 18,000
Workmen Compensation Fund 3,000 Stock 25,200
Mrs. Prakash’s Loan 5,000 Investments 20,000
Capital A/cs: Bills Receivable 8,000
Prakash 60,000 Machinery 60,000
Kiran 40,000 1,00,000 Goodwill 6,000
Profit and Loss A/c 19,800
Rishab’s Capital A/c 11,000
1,70,000 1,70,000
On the above date, the firm was dissolved and the following transactions took place:
(i) The Assets were sold for the following amounts:
Stock—` 20,200; Debtors—` 15,000; Machinery—` 40,000 and Investments—` 18,000.
(ii) Kiran took over the Bills Receivable at ` 7,000 and the Bills Payable at book value.
(iii) There was an unrecorded asset of ` 4,000 which was sold for ` 1,200.
(iv) Prakash agreed to pay his wife’s Loan.
(v) A contingent liability for a bill discounted at ` 8,000 was settled by Prakash.
(vi) Creditors were settled at a discount of 10% and Goodwill realised ` 5,000.
(vii) Realisation Expenses were ` 2,100 which were met by Kiran.
You are required to pass necessary Journal entries, prepare Realisation Account on the
dissolution of the firm and Capital Accounts of the Partners. (ISC 2007, Modified)
Solution: JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)
2020
March 31 Realisation A/c ...Dr. 1,39,200
To Debtors A/c 20,000
To Stock A/c 25,200
To Investments A/c 20,000
To Bills Receivable A/c 8,000
To Machinery A/c 60,000
To Goodwill A/c 6,000
(Being the various assets transferred to Realisation Account)
Creditors A/c ...Dr. 25,000
Bills Payable A/c ...Dr. 10,000
Provision for Doubtful Debts A/c ...Dr. 2,000
Mrs. Prakash’s Loan A/c ...Dr. 5,000
To Realisation A/c 42,000
(Being the creditors, bills payable, provision for Doubtful debts and
Mrs. Prakash’s loan transferred to Realisation Account)