1) X and Y were partners sharing profits in the ratio of 3:2.

Give Journal entries

under following situation at the time of dissolution of firm;

1 Sale of Assets – Rs. 50,000

Bank A/C /Cash A/C Dr. 50,000
To Realisation 50,000
2 Stock of Rs. 20,000 was taken by partner X
X's Capital A/C Dr. 20,000
To Realisation 20,000
3 Furniture worth Rs. 70,000 was taken by partner Y at Rs. 43,000.
Y's Capital A/C Dr. 43,000
To Realisation 43,000
4 Investments ( Book Value Rs. 40,0000 realised 150%.
Bank A/C /Cash A/C Dr. 6,00,000
To Realisation 6,00,000
5 A computer previously written of fully realized Rs. 3,500.
Bank A/C /Cash A/C Dr. 3,500
To Realisation 3,500
6 X, a partner takes over an unrecorded asset(typewriter) at Rs300
X's Capital A/C Dr. 300
To Realisation 300
7 An unrecorded asset realized Rs. 20,000.
Bank A/C /Cash A/C Dr. 20,000 20,000
To Realisation
8 100 share of Sumit ltd. Acquired at a cost of Rs3,600 have been written off from
the books .These were valued at Rs12 per share, and were divided amongst the
partners in their profit sharing ratio.
X's Capital A/C Dr. 720
Y's Capital A/C Dr. 480
To Realisation 1,200
9 Payment of Liabilities - Rs. 10,000
Realisation A/C Dr. 10,000
To Bank A/C /Cash A/C 10,000
10 There was an outstanding bill for repairs for Rs. 2000, which was paid off
Realisation A/C Dr. 2,000
To Bank A/C /Cash A/C 2,000
11 Bank Loan Rs. 34,000 was paid
Realisation A/C Dr. 34,000
To Bank A/C /Cash A/C 34,000
12 Partners X agreed to pay creditors Rs. 7,500.
 Realisation A/C Dr. 7,500
To X's Capital 7,500
13 Y, a partner, agreed to take creditors of Rs. 30,000 for Rs. 20,000.
Realisation A/C Dr. 20,000
To Y's Capital 20,000
14 Realisation expenses amounted to Rs. 10,000
Realisation A/C Dr. 10,000
To Bank A/C /Cash A/C 10,000
15 Realisation expenses amounted to Rs. 5,000 were paid by a partner.
Realisation A/C Dr. 5000
To Partner's Capital 5000
16 Realisation expenses amounted to Rs. 5,000 were paid by the firm on behalf of a
partner.
Patner's Capital A/C Dr. 5000
To Bank A/C /Cash A/C 5000
17 A partner was paid remuneration (including expenses) of Rs. 7,500 to carry out
dissolution of the firm. Actual expenses were Rs.10,000.
Realisation A/C Dr. 7,500
To Partner's Capital 7,500
18 X, the partner, is paid remuneration of Rs. 5,000 for dissolution of the firm.
Realisation expenses of Rs. 8,000 are met by the firm.
(a) Realisation A/C Dr. 5,000
To Partner's Capital 5,000

(b) Partner's Capital A/C Dr. 8,000

To Bank A/C /Cash A/C 8,000
19 X paid realization expenses of Rs. 15,000 out of her pocket and she was to to get a
remuneration of Rs. 18,000 for completing the dissolution expenses
Realisation A/C Dr. 18,000
To Partner's Capital 18,000
20 Realization expenses were to borne by a partner Deepak, for which he was
allowed a commission of 2% of net cash realized from dissolution. The net cash
realized from dissolution was Rs1,00,000 and actual expenses were Rs7,400.
Realisation A/C Dr. 2000
To Partner's Capital
(1,00,000*2/100) 2000
21 Expense of Realization Rs7,400 were to be borne by Khan, partner. Khan use firm’s
cash for paying these expenses.
Patner's Capital A/C Dr. 7400
To Bank A/C /Cash A/C 7400
22 There were total Debtors of Rs. 76,000. A provision for Doubtful Debts also stood
in the books of Rs. 6,000. Rs. 12,000 Debtors proved bad and rest paid the amount
due.
Bank A/C /Cash A/C Dr. 64,000
To Realisation 64,000
(76000 - 12000)
23 X agreed to pay off his husband’s loan of Rs. 7,000.
Realisation A/C Dr. 7,000
To X's Capital 7,000
24 X agreed to pay off his husband’s loan of Rs. 7,000 at a discount of 5%.
Realisation A/C Dr. 6650
To X's Capital 6650
(7000 -7000*5% - 6650)
25 A machine which was not recorded in the books was taken over by Y at Rs.3,000,
whereas its expected value was Rs. 5,000.
Y's Capital A/C Dr. 3,000
To Realisation 3,000
26 A contingent liability (not provided for) of Rs. 4,000 was also discharged.
Realisation A/C Dr. 4,000
To Bank A/C /Cash A/C 4,000
27 A creditors for Rs. 1,40,000 accepted building valued at Rs. 1,80,000 and paid to
the firm Rs. 40,000
Bank A/C /Cash A/C Dr. 40,000
To Realisation 40,000

(Note: when any asset taken over

by liability then no entry will be
passed, But balance amount which
he paid to firm will be
journalised.)
28 A creditor for Rs. 30,000 accepted machinery valued at Rs. 28,000 in full
settlement of his claim.
No Entry

29 A creditor amounting to Rs. 70,000 accepted Rs. 30,000 in cash and investments of
the book value of Rs. 45,000 in full settlement of his claim.
Realisation A/C Dr. 30,000
To Bank A/C /Cash A/C 30,000
30 K, a creditor, to whom Rs6,000 were due to be paid, accepted office equipment at
Rs4,000 and the balance was paid to him in cash
Realisation A/C Dr. 2,000
 To Bank A/C /Cash A/C 2,000
( With Balance amount)
31 Loss on dissolution was Rs. 4,000.
X's Capital A/C Dr. 2,400
Y's Capital A/C Dr. 1,600
To Realisation 4,000
32 Profit on realization Rs. 4,800.
Realisation A/C Dr. 4,800
To X's Capital 2,880
To Y's Capital 1,920
33 Workmen compensation Reserve stood at Rs. 75,000 in the Balance Sheet and
there was no liability towards workmen Compensation.
W.C.F A/C Dr. 75,000
To X's Capital 45,000
To Y's Capital 30,000
34 Workmen compensation Reserve stood at Rs. 60,000 and liability for it was
ascertained at Rs. 35,000.
(a) W.C.F A/C Dr. 60,000
To Realisation 60,000

(b) Realisation A/C Dr. 35,000

To Bank A/C /Cash A/C 35,000
If liability arise against W.C.F then it will be transferred in the
credit side of Realisation A/C and then paid off through
Realisation)
35 Workmen compensation Reserve stood at Rs. 60,000 and liability in respect of it
was ascertained Rs. 75,000.
(a) W.C.F A/C Dr. 60,000
To Realisation 60,000

(b) Realisation A/C Dr. 75,000

To Bank A/C /Cash A/C 75,000
36 Workmen compensation Reserve stood at Rs. 60,000 and liability in respect of it
was ascertained Rs. 60,000.
(a) W.C.F A/C Dr. 60,000
To Realisation 60,000

(b) Realisation A/C Dr. 60,000

To Bank A/C /Cash A/C 60,000
37 There was no Workman Compensation Reserve and firm had to pay Rs. 15,000 as
compensation to the workers.
 Realisation A/C Dr. 15,000
To Bank A/C /Cash A/C 15,000
( Journalise like a unrecorded
liability)
38 There was a balance of Rs. 10,000 in the General Reserve Account on the date of
dissolution.
General Reserve A/C Dr. 10,000
To X's Capital 6,000
To Y's Capital 4,000
39 Undistributed Balance (Debit) of Profit and Loss account Rs30,000. The firm has
three partners X,Y and Z.
X's Capital Dr. 18,000
Y's Capital Dr. 12,000
To P&L 30,000
40 P& L account on the asset side of the Balance sheet was Rs30,000.
X's Capital Dr. 18,000
Y's Capital Dr. 12,000
To P&L 30,000
41 Loan of Rs10, 000 advanced by a partner to the firm was refunded.
Partner's Capital A/C Dr. 10,000
To Bank A/C /Cash A/C 10,000
42 Deferred Revenue advertising expenditure appeared at Rs28,000.
X's Capital Dr. 16,800
Y's Capital Dr. 11,200
To Deferred Revenue Exp. 28,000
43 Loan to Rohit was adjusted through his capital account, Rs15,000
Rohit Capital's A/C Dr. 15,000
To Rohit Loan A/C 15,000
44 Buildings were auctioned for Rs. 30,000 and the auctioneer’s commission
amounted to Rs. 1,000.
Bank A/C /Cash A/C Dr. 29,000
To Realisation 29,000
45 Ravi was to get a remuneration of Rs.23,000 for completing the dissolution
process. He also agreed to bear realization expenses. Realisation expenses of
Rs.10,000 were paid by Ravi from the firm’s cash
[a] Realisation A/C Dr. 23,000
To Ravi's Capital 23,000

[b] Ravi's Capital A/C Dr. 10,000

To Bank A/C /Cash A/C 10,000
46 Amitesh, an old customer whose account for Rs.60,000 was written off as bad debt
 in the previous year, paid 90%.
Bank A/C /Cash A/C Dr. 54,000
To Realisation 54,000
47 Creditors of Rs.40,000, accepted furniture valued at Rs.38,000 in full settlement of
their claim.
No Entry
48 Land and Building was sold for Rs.3,00,000 through a broker who charged 2%
commission.
Bank A/C /Cash A/C Dr. 2,94,000
To Realisation 2,94,000
(3,00,000 -3,00,000*2%

2) Hanif and Jubed were partners in a firm sharing profits in the ratio of their capitals. On 31st
March, 2013 their Balance Sheet was as follows :
Balance Sheet of Hanif and Jubed as on 31st March, 2013

Liabilities Amount (Rs.) Amount (Rs.)

Creditors 1,50,000 Bank 2,00,000
Workmen’s Compensation Fund 3,00,000 Debtors 3,40,000
General Reserve 75,000 Stock 1,50,000
Hanif’s Current Account 25,000 Furniture 4,60,000
Capitals : Machinery 8,20,000
Hanif 10,00,000 Jubed’s current account 80,000
Jubed 5,00,000 15,00,000
 20,50,000 20,50,000

On the above date the firm was dissolved.

a. Debtors were realised at a discount of 5%. 50% of the stock was taken over by Hanif at
10% less than the book value. Remaining stock was sold for Rs. 65,000.
b. Furniture was taken over by Jubed for Rs. 1,35,000. Machinery was sold as scrap for
Rs.74,000.
c. Creditors were paid in full.
d. Expenses on realisationRs. 8,000 were paid by Hanif.
Prepare Realisation Account. Partner’s Capital accounts and Cash A/c to close the books
of the firm. . (CBSE, 2014)

3) Prachi,Ritika and Ishita were partners in a firm sharing profits and losses in the ratio of 5:3:2.
Inspite of repeated reminders by the authorities, they kept dumping hazardous material into a
nearby river. The court ordered for the dissolution of their partnership firm on 31st March
2012. Prachi was deputed to realize the assets and pay the liabilities. She was paid Rs.1, 000 as
commission for her services. The financial position of the firm was as follows:

Liabilities Amount (Rs.) Amount (Rs.)

Creditors 10,000 Furniture 37,000
Prachi’s Loan 2,000 Stock 7,500
Investment Fluctuation Fund 4,500 Investments 15,000
Capitals : Cash 9,000
Prachi 40,000 Ishita’s Capital 18,000
Ritika 30,000
70,000

86,500 86,500

Following was agreed upon:

Prachi took over investments for Rs.12,500. Stock and furniture realized Rs.41,500. There was
old furniture which has been written off completely from the books. Ritika agreed to take away
the same at the price of Rs.3,000. Compensation paid to the employee amounted to Rs.8,000.
This liability was not provided in the above balance Sheet. Realisation expenses amounted to
Rs.1,000. Prepare Realisation Account. Partner’s Capital accounts and Cash A/c to close the
books of the firm. ( CBSE, 2013)
4) A, B and C were partners sharing profit in the ratio of 3:1:1. Their balance sheet as on March
31st 2009, the date on which they dissolve their firm, was as follows:
 Liabilities Amount (Rs.) Amount (Rs.)
Creditors 6,000 Sundry assets 17,000
Loan 1,500 Debtors 24,200
Capitals : Less reserve for
A 27,500 doubtful debt 1,200 23,000
B 10,000 Stock 7,800
C 7,000 44,500 Bills receivables 1,000
cash 3,200

52,000 52,000

It was agreed that:

a. A to take over bills receivable at Rs.800 debtor amounting to Rs.20,000 at Rs.17,200 and the
creditors of Rs.6,000 were to be paid by him at this figure.
Particulars Amount Particulars Amount(R b. B
(Rs.) s.) is
to
take over all stock for Rs.7,000 and some sundry assets at Rs. 7,200 ( being 10% less than the
book value).
c. C is to take over sundry assets at 90% of the book value and assume the responsibility of
discharge of loan together with accrued interest of Rs.300.
d. The expenses of realization were Rs.270.
e. The remaining debtors were sold to a debt collecting agency at 50% of the book value.
Prepare Realisation A/c, Partners Capital a/c and Cash A/c.
5) Distinguish between ‘Dissolution of partnership’/ reconstitution of a firm and ‘Dissolution of
partnership firm’

6) Mala, Neela and Kala were partners sharing profits in the ratio of 3 : 2 : 1. On 1.3.2015 their
firm was dissolved. The assets were realized and liabilities were paid off. The accountant
prepared Realisation Account, Partners’ Capital Accounts and Cash Account, but forgot to post
few amounts in these accounts. You are required to complete these below given accounts by
posting correct amounts.
REALISATION ACCOUNT
To sundry assets By provision for bad debts 1000 1.
Machinery 10000 By sundry creditors 15000 isti
Stock 21000 By Sheela’s loan 13000 ngu
Debtors 20000 By repairs and renewal reserve 1200 ish
Prepaid insurance 400 By cash assest sold:
bet
Investments 3000 54400 Machinery 8000
To Mala’s capital A/C Stock 14000 we
-Sheela’s loan 13000 Debtors 16000 38000 en
To cash By Mala’s capital ‘Dis
-creditors paid 15000 - investments 2000 solu
To cash tion
dishounered bill paid 5000 ……………………………… …………
of
To cash
-expenses 800 par
88,200 88,200 tne
Particulars Amount Particulars Amount(R rshi
(Rs.) s.) p’
and ‘Dissolution of partnership firm’ on the basis of Court’s intervention.
(CBSE, 2014) 1
2. Give any one difference between reconstitution of a firm and dissolution of a firm.
(CBSE, 2011) 1

3. Mala, Neela and Kala were partners sharing profits in the ratio of 3 : 2 : 1. On 1.3.2015 their firm
was dissolved. The assets were realized and liabilities were paid off. The accountant prepared
Realisation Account, Partners’ Capital Accounts and Cash Account, but forgot to post few
amounts in these accounts. You are required to complete these below given accounts by posting
correct amounts. (CBSE, 2015)

REALISATION ACCOUNT
To sundry assets By provision for bad debts 1000
Machinery 10000 By sundry creditors 15000
Stock 21000 By Sheela’s loan 13000
Debtors 20000 By repairs and renewal reserve 1200
Prepaid insurance 400 By cash assest sold:
Investments 3000 54400 Machinery 8000
To Mala’s capital A/C Stock 14000
-Sheela’s loan 13000 Debtors 16000 38000
To cash By Mala’s capital
-creditors paid 15000 - investments 2000
To cash
dishounered bill paid 5000 ……………………………… …………
To cash
-expenses 800
88,200 88,200
Dr. PARTNERS’ CAPITAL ACCOUNT Cr.

Particulars Mala Neela Kala Particulars Mala Neela Kala

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
................ ............ ............. ............ ............... ............ ............ ...........
... ... .. ... .. ...
................ ............ ............. ............ .............. ............ ............ ...........
... .. ..... ... .. ...
To cash 12000 9000 By cash 1000
23000 15000 3000 23000 15000 3000

Cash Account

Particular Amount Particular Amount (Rs.)

(Rs.)
To Balance b/d 2,800 By Realisation A/c 15,000
To Realisation Account 38,000 - Creditors paid
-Sale of assets By Dishonoured bill 5,000
To kala’s capital Acount 1,000 ……………………….. ………
By Mala’s capital 12,000
By Neela capital 9,000

41,800 41,800