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Dissolution of a Partnership Firm 6.35

2. Give necessary Journal entries to record the discharge of following unrecorded liabilities:
(i) There was a contingent liability in respect of bill discounted but not matured of ` 10,000. An
acceptor of one bill of ` 2,000 became insolvent and fifty paise in a rupee was recovered. The
liability of the firm on account of this bill discounted has not so far been recorded.
(ii) There was a contingent liability in respect of a claim for damages for ` 15,000. Such liability was
settled for ` 12,500 and was undertaken by a partner Mr. Ashok to pay.
(iii) The firm was required to pay ` 10,000 as compensation to an employee for an injury suffered
by him, which was a contingent liability not accepted by the firm.
(iv) ` 8,000 for damages claimed by a customer against the firm. It was agreed at 50% by a compromise
between the customer and the firm.
(v) Trade creditors were ` 3,20,000. Half the trade creditors accepted Plant and Machinery at
the value of ` 1,08,000 and cash in full settlement of their claim after allowing a discount of
` 32,000. Remaining creditors were paid 95% in final settlement.
[Hints: (i) Dr. Realisation A/c and Cr. Bank A/c by ` 20,000*.
(ii) Dr. Realisation A/c and Cr. Bank A/c by ` 1,52,000.
*` 1,60,000 – ` 1,08,000 – ` 32,000 = ` 20,000.]

3. There was one unrecorded asset estimated at ` 20,000, half of which was handed over to an unrecorded
liability of ` 20,000 in settlement of a claim of ` 13,000 and remaining half was sold in the market at
a discount of ` 500. Give necessary Journal entries.

4. Following is the Balance Sheet of Rahul and Rohit as at 31st March, 2018:
Liabilities ` Assets `
Sundry Creditors 20,000 Goodwill 10,000
Bills Payable 20,000 Building 25,000
Bank Overdraft 10,000 Plant and Machinery 25,000
Mrs. Rahul’s Loan 20,000 Investments 15,300
Rohit’s Loan 10,000 Stock 8,700
Investments Fluctuation Fund 2,800 Debtors 17,000
Employees’ Provident Fund 1,200 Less: Provision for Doubtful Debts 2,000 15,000
General Reserve 2,000 Bills Receivable 10,000
Rahul’s Capital 20,000 Cash at Bank 13,000
Rohit’s Capital 20,000 40,000 Profit and Loss A/c 4,000
1,26,000 1,26,000

The firm was dissolved on 31st March, 2018 and the following was agreed upon:
(i) Rahul agreed to pay off his wife’s Loan.
(ii) Debtors realised ` 12,000.
(iii) Rohit took all Investments at ` 12,000.
(iv) Other assets realised as follows: `
Plant and Machinery 20,000
Building 50,000
Goodwill 6,000
(v) Sundry Creditors and Bills Payable were settled at 5% discount.
(vi) Rahul accepted Stock at ` 8,000 and Rohit took over Bills Receivable at 20% discount.
(vii) Realisation Expenses amounted to ` 2,000.
Prepare Realisation Account, Partners’ Capital Accounts and Bank Account.