Worksheet- Dissolution of Partnership

Date: 26-9-2019
1. Aman and Harsh are partners in a firm. They decided to dissolve their firm. Pass necessary journal entries for the
following after various assets (other than cash and bank) and third-party liabilities have been transferred to realization
account.
(i) There was a furniture worth Rs.50,000. Aman took over 50% of the furniture at 10% discount and the remaining
furniture was sold at 30% profit on book value.
(ii) Profit and Loss account was showing a credit balance of Rs.15,000 which was distributed between the partners.
(iii) Harsh’s loan of Rs.6,000 was discharged at Rs.6,200.
(iv) The firm paid realization expenses amounting to Rs.5,000 on behalf of Harsh, who had to bear these expenses.
(v) There was a bill for Rs.1,200 under discount. The bill was received from Sohan who proved insolvent and first
and final dividend of 25% was received from his estate.
(vi) Creditors, to whom the firm owed Rs.6,000 accepted stock of Rs.5,000 at a discount of 5% and balance in cash.
(vii) The loss on dissolution was Rs.8,000

2. Following is the balance sheet of Ravi and Prakash as at 31 st March, 2012

Liabilities (Rs.) Assets (Rs.)
Sundry Creditors 60,000 Cash 25,000
Ravi’s Loan 15,000 Debtors 42,000
General Reserve 15,000 Less: Provision for Doubtful Debts 6,000 36,000
Investment Fluctuation Fund 2,000 Stock 12,000
Capital A/c: Investments 18,000
Ravi 30,000 Plant and Machinery 41,000
Prakash 10,000
1,32,000 1,32,000
The firm was dissolved on 31st March, 2012, on the following terms.
(i) Ravi took over stock at Rs. 8,000.
(ii) Creditors payable after two months were paid immediately at a discount of 6% per annum.
(iii) Debtors realized Rs.35,000.
(iv) Plant and Machinery and investments realized Rs.60,000.
(v) An old computer completely written off was taken over by Prakash at Rs.1,200.
(vi) Realization Expenses of Rs.2,000 were paid by Ravi.
You are required to prepare (a) Realisation account (b) Partners’ capital account (c) Cash account.

3. Verma and Sharma were partners sharing profits in the ratio of 3:1. On 31 st March, 2011, their balance sheet was as
follows:
Liabilities (Rs.) Assets (Rs.)
Capital Accounts: Land and Building 70,000
Verma 1,20,000 Machinery 60,000
Sharma 80,000 Debtors 80,000
Creditors 70,000 Bank 60,000
2,70,000 2,70,000
The firm dissolved on 1st April,2011 and the assets and liabilities were settled as follows:
(i) Creditors of Rs.50,000 took over land and building in full settlement of their claims.
(ii) Remaining creditors were paid in cash.
(iii) Machinery was sold at a depreciation of 30%.
(iv) Debtors were collected at a cost of Rs.500.
(v) Expenses on realization were Rs.1,700.
Pass Journal Entries for dissolution of the firm.

4. Pass the necessary journal entries for the following transactions on the dissolution of the firm of P and Q after the various
assets (other than cash) and outside liabilities have been transferred to realization account.
(i) Bank loan Rs.12,000 was paid.
(ii) Stock worth Rs.16,000 was taken over by a Partner Q
(iii) Partner P paid a creditor Rs.4,000.
(iv) An asset not appearing in the books of accounts realized Rs.1,200
(v) Expenses of realization Rs.2,000 were paid by Partner Q
(vi) Profit on realization Rs.36,000 was distributed between P and Q in 5:4 ratio.

5. X, Y and Z were partners sharing profits in the ratio of 2:2:1. Their Balance Sheet on 31st March, 2010, when they
dissolved the firm was as follows:
Liabilities (Rs.) Assets (Rs.)
Capital Accounts: Other sundry assets 1,17,000
X 1,27,500 Furniture 11,000
Y 1,10,000 Debtors 1,24,200
Z 17,000 Less: Provision for doubtful debts 1,200 1,23,000
Loan 11,500 Stock 17,800
Creditors 16,000 Cash 13,200
2,82,000 2,82,000
It was agreed that:
(i) X to take over furniture at Rs.8,000 and debtors amounting to Rs.1,20,000 at Rs.1,17,200 and the creditors of Rs.16,000
were to be paid by him at this figure.
(ii) Y is to take over all stock for Rs. 17,000 and some sundry assets at Rs.72,000 (being 10% less than the book value).
(iii) Z to take over remaining sundry assets at 80% of the book value and assume the responsibility of discharge of loan
together with accrued interest of Rs.2,300.
(iv) The expenses on realization were Rs.2,700. The remaining debtors were sold to a debt collecting agency at 50% of the
value.
Prepare necessary accounts to close the books of the firm.

6. Y and Z were sharing profits and losses in the ratio of 3:1 respectively., decided to dissolve the firm on 31 st March, 2012
at which date some of the balance were:
Y’s capital Rs. 50,000
Z’s capital Rs. 5,000 (Debit Balance)
Profit and Loss Rs. 4,000 (Debit Balance)
Trade Creditors Rs. 15,000
Loan from Mrs. Y Rs.5,000
Cash at bank Rs.1,000
The assets (other than cash at bank) realized Rs.55,000 and all creditors including loan from Mrs. Y were paid off
less 5% discount. Realisation expenses amounted to Rs.500. Prepare the realization account, bank account and capital of the
partners assuming that both partners are solvent.

7. The Balance Sheet of Sudha, Rahim and Kartik who were sharing profits in the ratio of 3:3:4 as on 31st March, 2012 was
as follows:
Liabilities (Rs.) Assets (Rs.)
General Reserve Cash 16,000
Bills Payable 1,27,500 Stock 44,000
Loan 1,10,000 Investments 47,000
Sudha 17,000 Land and Building 60,000
Rahim 11,500 Sudha’s Loan 10,000
Kartik 16,000
1,77,000 1,77,000
Sudha died on 30th June, 2012. The partnership deed provided for the following on the death of a partner.
(i) Goodwill of the firm to be valued at two years purchase of average profits of last three years.
(ii) Sudha’s share of profits or loss till the date of her death was to be calculated on the basis of sales. Sales for the year
ended 31st March, 2012 amounted to Rs.4,00,000 and that from 1 st April to 30th June,2012 to Rs.1,50,000. The profit for
the year ended 31st March,2012 was Rs.1,00,000.
(iii) Interest on capital was to be provided @ 6% per annum.
(iv) The average profits of the last three years were Rs.42,000.
(v) According to Sudha’s will, the executors should donate her share to ‘MatriChhaya, an orphanage for girls’.

8. Indu and Hema were partners. The partnership deed provided for:
(i) Profits to be divided as Indu ½; Hema 1/3 and 1/6 th to be transferred to reserves.
(ii) The accounts are closed on 31st March every year.
(iii) In the event of death of a partner, the executors will be entitled to
a) Capital to be credited on the date of the death.
b) Interest on capital at 12% per annum.
c) Proportion of profit to the date of death on the average profits credited for the last 3 years.
d) Share of goodwill based on three years’ purchase of the average profits of the preceding 3 years.
e) The following information is provided to you: Indu ‘s Capital Rs.1,20,000; Hema’s capital Rs. 80,000;
Reserves Rs.30,000; Cash Rs.1,10,000; Investments Rs.70,000.
Prepare Indu’s capital account to be presented to her executor who died on 30th April, 2007. The profits for the
preceding years were Rs.84,000, Rs.90,000 and Rs.99,000.