Page 147 - ISCDEBK-12

Dissolution of a Partnership Firm 6.21
The firm was dissolved and the assets and liabilities were settled as follows:

(i) Debtors realised ` 95,000 and machinery was sold for ` 1,30,000.
(ii) Half of the creditors accepted furniture at 25% less than the book value subject to
levy of GST, which was paid by them and cash of ` 10,000. Remaining creditors
were paid out at a discount of 10%.

(iii) An unrecorded asset (Bill of Exchange) of ` 6,900 was handed over to an unrecorded
liability of ` 6,000 in full settlement.
(iv) A took over computers for ` 57,800.
(v) He also agreed to pay his wife’s loan.
(vi) A liability in respect of workmen compensation of ` 10,000 is paid.

(vii) Realisation Expenses of ` 5,000 were paid by B on behalf of firm to an agency
handling dissolution of the firm.
(viii) Sale of assets and payment of realisation expenses are subject to levy of CGST
and SGST @ 9% each.
Pass the Journal entries, prepare Realisation Account, CGST and SGST (Output and Input)
Accounts, Partners’ Capital Accounts and Bank Account to close the books of the firm.
Solution: JOURNAL

Date Particulars L.F. Dr. (`) Cr. (`)
Realisation A/c ...Dr. 3,60,000
To Computers A/c 60,000
To Furniture A/c 50,000
To Machinery A/c 1,50,000
To Debtors A/c 1,00,000
(Being the assets transferred)

Provision for Doubtful Debts A/c ...Dr. 10,000
Mrs. A’s Loan A/c ...Dr. 50,000
Sundry Creditors A/c ...Dr. 70,000
To Realisation A/c 1,30,000
(Being the outside liabilities transferred)
A’s Capital A/c ...Dr. 18,000
B’s Capital A/c ...Dr. 12,000
To Profit and Loss A/c 20,000
To Advertisement Suspense A/c 10,000
(Being the debit balance of fictitious assets debited to Partners’ Capital Accounts)
General Reserve A/c ...Dr. 30,000
To A’s Capital A/c 18,000
To B’s Capital A/c 12,000
(Being the Genaral Reserve credited to Partners’ Capital Accounts)