Page 119 - MA-12

Dissolution of a Partnership Firm 5.7

(v) (a) Realisation A/c ...Dr. 15,000
To Bank A/c 15,000
(Being the liability discharged)
(b) Workmen Compensation Reserve A/c ...Dr. 15,000
To X’s Capital A/c 6,000
To Y’s Capital A/c 6,000
To Z’s Capital A/c 3,000
(Being the transfer of excess workmen compensation reserve)
(vi) No Journal entry is required since there is no realisation.
Illustration 4.
X, Y and Z commenced business on 1st April, 2015 with capitals of ` 5,00,000; ` 4,00,000
and ` 3,00,000 respectively. Profits and losses were shared in the ratio of 4 : 3 : 3. Capitals
carried interest at 5% p.a. During 2015–16 and 2016–17 they made profits of ` 2,00,000
and ` 2,50,000 (before allowing interest on capital). Drawings of each partner were
` 50,000 per year. After completion of the venture for which the firm was constituted,
it was dissolved on 31st March, 2017. Creditors on that date were ` 1,20,000. The assets
realised ` 13,00,000 net.
Give necessary accounts to close the books of the firm.

Solution:
In this problem, Balance Sheet on the date of dissolution is not given. Further, partners’
capitals and book value of assets on the date of dissolution are also not given. Hence, first
of all balances of partners’ capitals will be ascertained. After that, Balance Sheet on the
date of dissolution, i.e., 31st March, 2017, shall be prepared to ascertain the value of assets.

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Date Particulars X (`) Y (`) Z (`) Date Particulars X (`) Y (`) Z (`)
2016 2015
March 31 To Bank A/c 50,000 50,000 50,000 April 1 By Bank A/c 5,00,000 4,00,000 3,00,000
(Drawings) 2016
To Balance c/d 5,31,000 4,12,000 3,07,000 March 31 By Interest on
Capital A/c 25,000 20,000 15,000
By Profit and
Loss App. A/c 56,000 42,000 42,000
(Net Profit)
(` 2,00,000 –
` 60,000)
5,81,000 4,62,000 3,57,000 5,81,000 4,62,000 3,57,000
2017 2016
March 31 To Bank A/c 50,000 50,000 50,000 April 1 By Balance b/d 5,31,000 4,12,000 3,07,000
(Drawings) 2017
To Balance c/d 5,82,550 4,38,850 3,28,600 March 31 By Interest on
Capital A/c 26,550 20,600 15,350
By Profit and
Loss App. A/c 75,000 56,250 56,250
(Net Profit)
(` 2,50,000 –
` 62,500)
6,32,550 4,88,850 3,78,600 6,32,550 4,88,850 3,78,600