Page 196 - DEBKVOL-1

Chapter 8 Dissolution of a Partnership Firm 8.21
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Dr. A’S LOAN ACCOUNT Cr.
Particulars ` Particulars `
To Bank A/c 40,000 By Balance b/d 40,000

Dr. BANK ACCOUNT Cr.
Particulars ` Particulars `
To Balance b/d 52,000 By Realisation A/c—Contingent liability 4,000
To Realisation A/c—Debtors 48,000 By Realisation A/c 2,01,800
To Realisation A/c—Plant and Machinery, 3,09,000 —Creditors, B/P, PF, and Repairs Bill
Furniture and Fitting, Building and Goodwill By Realisation A/c—Realisation Expenses 8,000
To Realisation A/c—Z 1,000 By A‘s Loan A/c 40,000
By A’s Capital A/c (Final Payment) 1,42,100
By B’s Capital A/c (Final Payment) 14,100
4,10,000 4,10,000

Note: 1. Employees’ Provident Fund is a liability.
2. Advertisement Suspense Account is debited to Partners’ Capital Accounts in their profit-sharing ratio.
Illustration 18.
X, Y and Z were partners in a firm sharing profits in the ratio of 2 : 2 : 1. In spite of repeated
reminders by the authorities, the partners kept dumping hazardous material into a nearby
river. The court ordered for the dissolution of their partnership firm. On 31st March, 2018,
their Balance Sheet was as follows:

Liabilities ` Assets `
Creditors 50,000 Cash 60,000
Bank Loan 35,000 Debtors 75,000
Employees’ Provident Fund 15,000 Stock 40,000
Investment Fluctuation Reserve 10,000 Investments 20,000
Commission received in Advance 8,000 Plant 50,000
Capital A/cs: Profit and Loss A/c 3,000
X’s 50,000
Y’s 50,000
Z’s 30,000 1,30,000
2,48,000 2,48,000
On this date the firm was dissolved. X was appointed to realise the assets. X was to receive
5% commission on the sale of assets (except cash) and was to bear all expenses of realisation.
X realised the assets as follows:
Debtors 20% less, Stock ` 35,500, Investments 80%, Plant 90% of the book value.
Expenses of realisation amounted to ` 7,500 paid by the firm on X’s behalf. Commission
received in advance was returned to the customers after deducting ` 3,000. Firm had to pay
` 8,500 to outstanding salary not provided for earlier. Compensation paid to employees
amounted to 17,000. This liability was not provided for in the above Balance Sheet. ` 20,000
has to be paid for Provident Fund.
Prepare Realisation Account, Capital Accounts of Partners and Cash Account.