AHSEC Accountancy Question Bank: Dissolution of Partnership Firm

Dissolution of Partnership

1. Amal and Bimal are two partner in a firm. They share profits in the ratio of 3:2. Following is their Balance Sheet as on 31^st December, 2008 on which day they dissolved their partnership firm.

Balance Sheet

Liabilities	Amount	Assets	Amount
Creditors Reserve fund Capital : Amal    = 20,000 Bimal   = 15,000	20,000 5,000 35,000	Fixed assets Stocks Debtors Cash Profit & Loss A/c	30,000 10,000 15,000 3,000 2,000
	60,000		60,000

Fixed assets realised Rs. 28,000. Stock at 8,000 and Bad debts Rs. 2,000. Goodwill realised Rs. 5,000. Creditors were paid at a discount of 10%. Expenses of realisation were Rs. 1,500. Pass the Journal entries in the books of the firm.

2. Kumar and Gaurav are partners sharing profits and losses as three – fourth and one – fourth. They agreed to dissolve their firm. On the date of dissolution, they have the following Balance Sheet was as follows:

Liabilities	Rs.	Assets	Rs.
Capital A/c : Kumar                                                    40.000 Gaurav                                                   35,000 Creditors Loan from Mrs. Gaurav	75,000 16,000 13,000	Land & Building Plant & Machinery Sundry Debtors                             22,000 Less : Reserve                                  2,000 Bills Receivable Cash in hand	50,000 18,000 20,000 7,500 8,500
	1,04,000		1,04,000

The assets realised as follows :

(i)     Land & Building Rs. 48,000.

(ii)   Sundry Debtors Rs. 18,000.

(iii) Goodwill Rs. 16,500.

Kumar took over the plant and machinery at 5% more than the book value. Gaurav agreed to discharge his wife’s loan. Creditors are paid expenses on realisation amounted Rs. 700. You are required to show Realisation Account , Cash Account and Capital Accounts of the partners on dissolution.

3. Ram and Shyam share the profits equally. They decided to dissolve their firm. Their liabilities were : Ram’s Capital Rs. 25,000; Shyam’s Capital Rs. 30,000; Creditors Rs. 12,500; Bills payable Rs.7,500; Assets of the firm realized Rs.1,00,000. Prepare a Realization Account.

4. The following is the Balance Sheet of Anju and Manju sharing profits in the ratio of 3:2 as on December 31, 2003 :

Balance Sheet as at December 31, 2003

Liabilities	Amount	Assets	Amount
Creditors Loan by Anju’s brother Loan by Manju General Reserve Capitals : Anju Manju Profit and Loss	19,000  5,000 7,500 1,250 5,000 4,000 2,500	Plant and Machinery Furniture and Fixtures Investment Stock Debtors                                                 10,000 Less: provision                                          500 Bank	14,000 2,000 5,000 3,000 9,500 5,750
	41,750		41,750

The firm was dissolved on March 31, 2003. As a result,

(a)   Anju took over investments at an agreed value of Rs. 4,000 and agreed to pay loan taken from her brother

(b)   Realization of assets is as follows : Stock Rs. 2,500, Debtors Rs. 9,250, Furniture and Fixture Rs. 2,250, Plant and Machinery Rs. 12,500

(c)    Expenses of realization were Rs. 300

(d)   Creditors allowed 2.5% discount in full settlement. Record necessary journal entries and close the books of the firm.

6. Dinesh, Ramesh and Satish were partners in a firm sharing-profits in the ratio of 5:3:2. They agreed to dissolve their partnership firm on March 31, 2002. Dinesh was asked to realize the assets and pay off liabilities. He had to bear the realization expenses for which he was promised a lump sum amount of Rs. 2,000. Their financial position on that date was as follows :

Balance Sheet as at March 31, 2002

Liabilities	Amount	Assets	Amount
Creditors Investment fluctuation fund Capitals : Dinesh Ramesh Suresh	27,500 9,000 75,000 30,000 16,000	Plant and Machinery Investment Stock Debtors                                               14,200 Less: provision                                        900 Bank Profit and losses account	60,000 30,000 11,000 13,300 11,200 32,000
	1,57,500		1,57,500

Dinesh agreed to purchase investments at Rs. 25,000. Ramesh took over stock at Rs. 10,500 and Debtors at Rs. 11,800. Plant and Equipment was sold for Rs. 45,000. Unrecorded assets realized cash of Rs. 3,000. Actual realization expenses amounted to Rs. 1,800. Prepare necessary ledger accounts on the dissolution of firm.

7. Lata, Geeta and Neeta were partners sharing profits in the ratio of 5:3:1. They decided to dissolve the partnership on March 31, 2001 and their balance sheet was as under.

Balance Sheet Lata, Geeta and Neeta as at March 31, 2001

Liabilities	Amount	Assets	Amount
Creditors Bills Payable Mortgage loan General Reserve Capitals : Lata Geeta Neeta	16,600 3,400 15,000 4,500 22,000 18,000 10,000	Plant and Machinery Investment Stock Debtors                                                   25,000 Less: provision                                         5,000 Bank Deferred Revenue Expenditure Suspense	30,000 10,000 10,000 20,000 9,500 5,000 5,000
	89,500		89,500

There was a typewriter written off which realised Rs. 500. They had a joint life policy of Rs. 20,000 which was surrendered for Rs. 5,000. Goodwill was sold for Rs. 5,000. Other assets realized – stock Rs. 6,700; debtors 50%; plant and machinery 10% less than its book value. Creditors were paid Rs. 16,000. But an outstanding bill of Rs. 400 for repairs was to be paid off. Expenses on realization amounted to Rs. 620. Give journal entries to record the above transactions and also prepare necessary ledger accounts.

8. Following is the Balance Sheet of Raman and Ramesh on June 30, 2002.

Liabilities	Amount	Assets	Amount
Creditors Bills Payable Bank overdraft Mrs. Raman’s loan Ramesh’s loan Investment fluctuation fund Employees provident fund Ramesh’s loan General Reserve Raman’s Capital Ramesh’ Capital	20,000 20,000 10,000 5,000 5,000 2,800 1,200 10,000 2,000 20,000 20,000	Goodwill Building Plant and fitting Investment Stock Debtors                                                  17,000 Less: provision                                        2,000 Bills Receivable Deferred Revenue Expenditure Suspense	10,000 25,000 25,000 15,300 8,700 15,000 10,000 2,000 5,000
	1,16,000		89,500

The firm was dissolved on June 30, 2002 and following was the position:

a)      Raman agreed to pay off his wife’s loan.

b)      Debtors realized Rs. 12,000.

c)      Ramesh’s loan transferred to his capital account.

d)      Ramesh took away all the investments at Rs. 12,000.

e)      Other assets realized as follows : Plant and Fittings 20,000, Building 50,000, Goodwill 6,000

f)       Sundry creditors and Bills payable were settled at 5% discount.

g)      Raman accepted stock at Rs 8,000 and Ramesh took over bills receivable at 20% discount.

h)      Realization expenses amounted to Rs. 2,000.

Record journal entries and also prepare various ledger accounts.

9. R, M and H were in partnership sharing profits and losses in the ratio of 8: 5: 3 respectively. The firm’s balance sheet as on 31^st March, 2015 was as under:

Balance Sheet

Liabilities	(Rs.)	Assets	(Rs.)
Capitals :     R          =      5,000/-     M         =     2,000/-     H          =     1,000/- Sundry Creditors Bank Loan	8,000 2,953 5,500	Current Account : R        =       2,195/- M       =       1,733/- H        =       1,520/- Machinery Stock Sundry Debtors Cash	5,448 1,050 6,059 3,572 324
TOTAL	16,453	TOTAL	16,453

It was resolved to dissolve the partnership as on that date. The assets were realised as follows:

Machinery Stock Sundry Debtors

600/- 5,230/- 3,555/-

Pass Journal Entries and necessary ledger Accounts.