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Dissolution of a Partnership Firm 6.37
9. Rita Chowdhary and Sobha are partners in a firm, Fancy Garments Exports, sharing profits and losses
equally. On 1st January, 2019 the Balance Sheet of the firm was as follows:
Liabilities ` Assets `

Sundry Creditors 75,000 Cash 6,000
Bills Payable 30,000 Bank 30,000
Mr. Chowdhary’s Loan 15,000 Stock 75,000
Reserve Fund 24,000 Book Debts 66,000
Capital A/cs: Less: Provision for Doubtful Debts 6,000 60,000
Rita Chowdhary 90,000 Plant and Machinery 45,000
Sobha 30,000 Land and Building 48,000
2,64,000 2,64,000

The firm was dissolved on the date given above. The following transactions took place:
(i) Rita Chowdhary undertook to pay Mr. Chowdhary’s Loan and took over 50% of the Stock at a
discount of 20%.
(ii) Book Debts realised ` 54,000; balance of the Stock was sold off at a profit of 30% on cost.
(iii) Sundry Creditors were paid out at a discount of 10%. Bills Payable were paid in full.
(iv) Plant and Machinery realised ` 75,000; Land and Building ` 1,20,000.
(v) Rita Chowdhary took over the Goodwill of the firm at a valuation of ` 30,000.
(vi) Realisation Expenses were ` 5,250.
Show Realisation Account, Partners’ Capital Accounts and Bank Account in the books of the firm.
10. Atal, Jawahar and Lal entered into partnership on 1st April, 2017. They contributed Capitals ` 40,000;
` 30,000; and ` 20,000 respectively sharing profits in the ratio of 3 : 2 : 1. Interest on capital was to
be allowed @ 15% p.a. and interest on drawings was to be charged at an average rate of 5%. During
the two years ended 31st March, 2018 and 31st March 2019, the firm earned a profit of ` 21,600 and
` 25,140 respectively before allowing or charging interest on capital and drawings. The drawings of
each partner were ` 6,000 per year.
On 31st March, 2019, the partners decided to dissolve the partnership due to a difference of opinion.
On that date, the Creditors amounted to ` 20,000. The Assets, other than cash ` 2,000, realised
` 1,21,000. Expenses of Dissolution amounted to ` 760.
Draw up necessary Ledger Accounts to close the books of the firm.

GUIDE TO ANSWERS

1. Gain (Profit) on Realisation—` 1,87,500; Final Payment to A—` 51,000; Amount brought in by
B—` 9,000 and C—` 34,500. Total of Bank A/c—` 1,18,500.
3. (i) Dr. Bank A/c and Cr. Realisation A/c—` 9,500*.
(ii) Dr. Realisation A/c and Cr. Bank A/c—` 7,000**.
*` 20,000 (Unrecorded Assets) – of ` 20,000 (Settlement of Liability)—` 500 = ` 9,500.
**` 20,000 – ` 13,000 = ` 7,000.
4. Gain (Profit) on Realisation—` 9,800; Final Payment: Rahul—` 35,900; Rohit—` 13,900. Total of Bank
Account—` 1,01,000.