DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : J. Satyanarayana Rao
Designation : Senior Lecturer
Branch : Commercial and computer practice
Institute : Govt. Poly. For women, Guntur
Semester : IV Semester
Subject : Accountancy—III
Sub-Code : CCP-402
Topic : Dissolution of partnership
Duration : 50 minutes
Sub Topic : Account treatment – all partners
Teaching Aids : PPT, animation

CCP402.70 1
Objective
On completion of this period you would be
able to solve :

 Problem on dissolution, when all the partners

are solvent

CCP402.70 2
Recap

In the previous class we have already learned

 Problems on dissolution when all the partners are
solvent

CCP402.70 3
Example
A,B,& C carrying on Business sharing profits and
losses equally agreed to dissolve the partnership
on 31st December,2003.

CCP402.70 44
 Contd….
BALANCE SHEET of A,B,& C as on
31st Dec.2003.
Liabilities Amount Assets Amount
Capital accounts Land and building 5,00,000
A……4,00,000
B……1,00,000
C……5,00,000 10,00,000
Loan from X 3,00,000 Plant and 4,00,000
machinery
Sundry creditors 4,50,000 Furniture 1,00,000
Stock 3,50,000
Sundry debtors 2,50,000
Cash in hand 1,50,000
Total 17,50,000 Total 17,50,000
CCP402.70 5
 Contd….
X agreed to take over the entire stock in full settlement
of his Loan. Sundry Debtors were realised at
Rs.2,00,000 and Creditors were settled at rs.3,40,000.
It was decided that A&B would take over the following
Assets at the following sums.
Land & Buildings……………… Rs.6,00,000
Plant & Machinery…………… Rs. 3,00,000
Furniture …………………… Rs. 60,000

CCP402.70 66
 Contd….

AB decided to form a partnership sharing profits &

Loss In the ratio of 3:1. It was agreed that the firm
would require
A total capital of Rs.10,00,000 which A&B would bring
their capitals being in proportion to their profit sharing
ratio.
Draw up the relevant accounts to close the books of
A,B,& C. Prepare the opening Balance Sheet of A&B.

CCP402.70 77
solution to Ex
Realisation Account
Dr Cr
31.Dec.2003 31.Dec.2003
To land and 5,00,000 By sundry creditors 4,50,000
building
To plant and 4,00,000 By loan from X 3,00,000
machinery
Furniture 1,00,000 A and B A/c 9,60,000
Stock 3,50,000 Assets taken over
Sundry debtors 2,50,000 Cash A/c (debtors) 2,00,000
To cash A/c 3,40,000 By capital A/c
A….10,000
B….10,000
C….10,000 30,000
Total 19,40,000 Total 19,40,00
CCP402.70 8
 Contd….

Note: No further payment to X is required. The stock

is taken in full satisfaction of the loan. So it does not
appear in Realisation Account

CCP402.70 99
Capital accounts
Dr. Cr.
A B C A B C

Realisati 10,000 10,000 10,000 By 4,00,000 1,00,000 5,00,000

on balance
[losses] b/d

Cash ----- ------ 4,90,000 By cash 3,60,000 1,60,000 -----

,
A and B 7,50,000 2,50,000 -----
A/c
Total 7,60,000 2,60,000 5,00,000 Total 7,60,000 2,60,000 5,00,000

CCP402.70 10
 A and B Accounts
Dr. Cr.
31.Dec.2003 31.Dec.2003
To realisation 9,60,000 A’s Capital A/c 7,50,000
A/c
Cash A/c 40,000 B’s capital A/c 2,50,000

Total 10,00,000 Total 10,00,000

CCP402.70 11
 Cash Account
Dr. Cr.
31.dec.2003 31.dec.2003
To balance 1,50,000 By realisation 3,40,000
b/d A/c
[creditors]
To realisation 2,00,000 C’s capital A/c 4,90,000
A/c [settlement]
[S. debtors]
To B’s capital 1,60,000 A and B Firm 40,000
A/c
Total 8,70,000 Total 8,70,000

CCP402.70 12
 Balance Sheet of A and B
Dr. Cr.
Liabilities Amount Assets Amount
A’s capital A/c 7,50,000 Cash in hand 40,000

B’s capital A/c 2,50,000 Furniture 60,000

Plant and 3,00,000

machinery
Land and 6,00,000
building
Total 10,00,000 Total 10,00,000

CCP402.70 13