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Dissolution of a Partnership Firm 6.11
Illustration 5.
Following was the Balance Sheet of Fox and Wolf as at 31st March, 2018, when they
decided to dissolve the firm:

Liabilities ` Assets `
Creditors 88,500 Cash at Bank 4,500
Ms. Wolf’s Loan 40,000 Stock 18,000
Bills Payable 23,000 Debtors 42,000
Capital A/cs: Furniture 12,000
Fox 30,000 Machinery 1,06,500
Wolf 24,000 54,000 Profit and Loss A/c 22,500
2,05,500 2,05,500
The assets realised: Stock—` 10,500; Debtors—` 27,750; Machinery—` 88,500. Furniture
was taken by Fox at ` 7,500. Bills Payable were paid in full, while Creditors were settled
at 2% discount. Ms. Wolf accepted ` 38,500 in full settlement of her Loan Account. There
was a claim for damages against the firm for ` 4,000 which was settled at ` 2,000.
One customer, whose account was written off as bad, now paid ` 1,800, which is not
included in ` 27,750 given above. Actual Realisation Expenses amounted to ` 2,100.
Prepare Realisation Account, Partners’ Capital Accounts and Bank Account to close the
books of the firm. (ISC 1995, Modified)

Solution: In the Books of Fox and Wolf
Dr. REALISATION ACCOUNT Cr.
Particulars ` Particulars `
To Sundry Assets (Transfer): By Sundry Liabilities (Transfer):
Stock A/c 18,000 Creditors A/c 88,500
Debtors A/c 42,000 Bills Payable A/c 23,000
Furniture A/c 12,000 Ms. Wolf’s Loan A/c 40,000 1,51,500
Machinery A/c 1,06,500 1,78,500 By Bank A/c (Assets Realised):
To Bank A/c (Liabilities Paid): Stock 10,500
Bills Payable 23,000 Debtors 27,750
Creditors 86,730 Machinery 88,500 1,26,750
Ms. Wolf’s Loan 38,500 By Fox’s Capital A/c (Furniture Taken Over) 7,500
Claim for Damages 2,000 1,50,230 By Bank A/c (Recovery of Bad Debts) 1,800
To Bank A/c (Expenses) 2,100 By Loss on Realisation:
Fox’s Capital A/c 21,640
Wolf’s Capital A/c 21,640 43,280
3,30,830 3,30,830

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars Fox (`) Wolf (`) Particulars Fox (`) Wolf (`)
To Profit and Loss A/c 11,250 11,250 By Balance b/d 30,000 24,000
To Realisation A/c 7,500 ... By Bank A/c 10,390 8,890
(Furniture Taken Over) (Balancing Figure)
To Realisation A/c (Loss) 21,640 21,640
40,390 32,890 40,390 32,890