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Chapter 8 Dissolution of a Partnership Firm 8.11
.
Illustration 8.
A, B and C were partners in a firm and shared profits in the ratio of 3 : 2 : 1. On 31st March,
2018 their Balance Sheet was as follows:

Liabilities ` Assets `
Creditors 65,000 Cash 22,500
Bills Payable 20,000 Debtors 52,300
Employees’ Provident Fund 12,000 Stock 36,000
Investments Fluctuation Reserve 6,000 Investments 15,000
Commission Received in Advance 8,000 Plant 91,200
Capital A/cs: Profit and Loss A/c 54,000
A 80,000
B 50,000
C 30,000 1,60,000
2,71,000 2,71,000
On this date the firm was dissolved. A was appointed to realise the assets. A was to receive
5% commission on the sale of assets and was to bear all expenses of realisation.
A realised the assets as follows:
Debtors ` 30,000; Stock ` 26,000; Investments 75% of book value; Plant ` 42,750. Expenses of
realisation amounted to ` 4,100.
Commission received in advance was returned to the customers after deducting ` 3,000.
The firm had to pay ` 7,200 for outstanding salary not provided for earlier. Compensa tion paid
to employees amounted to ` 9,800. This liability was not provided for in the above Balance
Sheet. ` 25,000 had to be paid towards Employees’ Provident Fund.
Prepare Realisation Account, Partners’ Capital Accounts and Cash Account.
Solution:
Dr. REALISATION ACCOUNT Cr.
Particulars ` Particulars `
To Sundry Assets—Transfer: By Creditors 65,000
Debtors 52,300 By Bills Payable 20,000
Stock 36,000 By Employees’ Provident Fund 12,000
Investments 15,000 By Investments Fluctuation Reserve 6,000
Plant 91,200 1,94,500 By Commission Received in Advance 8,000 1,11,000
To A’s Capital A/c (Commission) 5,500 By Cash A/c—Assets Realised:
(5/100 × ` 1,10,000) Debtors 30,000
To Cash A/c—Liabilities Paid: Stock 26,000
Commission Received in Investments 11,250
Advance 5,000 Plant 42,750 1,10,000
Outstanding Salary 7,200 By Loss transferred to:
Employees’ Compensation 9,800 A’s Capital A/c 55,500
Employees’ Provident Fund 25,000 47,000 B’s Capital A/c 37,000
To Cash A/c: C’s Capital A/c 18,500 1,11,000
Creditors 65,000
Bills Payable 20,000 85,000
3,32,000 3,32,000