Dissolution Of Firm

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DISSOLUTION

ACCOUNTS NOTES

1. Umesh, Pradeep & Bharat were partners sharing profit & losses in the ratio of 5:3:2. They dissolved their firm on 31.03.00 ,which day their balance sheet stood as follows Balance sheet of M/S Indian Trader as on 31.03.2000. Liabilities Amount Assests Amount Partner’s capital A/c Goodwill 8,000 Umesh 1,15,000 Premises 40,000 Pradeep 77,000 1,92,000 Machinery 32,000 General reserve 20,000 Debtors 56,000 Creditors 42,000 -R.D.D. (6,000) 50,000 Bills payable 14,000 Stock 60,000 Mrs.umesh’s loan 24,000 Furniture 40,000 Pradeep loan 20,000 Cash in hand 14,000 O/s salaries 6,000 Bill receivable 40,000 Bank O/D 4,000 Bharat’s capital 28,000 Profit and loss A/c 10,000 3,22,000

3,22,000

Informations: 1. Premises realised Rs. 27,000, Machinery was sold for Rs. 17,000 , Bad debts incurred Rs.4,000 ,Discount allowed on bills was Rs .1,000 and unrecorded computer realised 3,000 2. Umesh took over furniture at 20% discount 3. Stock was sold at 10% discount 4. Pradeep took over investment at Rs. 2000 which were written off from the books 5. Creditors of Rs.1,000 was not traceable , the remaining creditors were settled at 5% discount 6. Bills payable was taken over by Pradeep at book value 7. Firm was ordered by court to pay compensation to third party Rs.7,000. 8. Pradeep loan was paid off @ 90% 9. Realisation expenses were Rs. 3,000 but of which Rs. 1,000 was paid by umesh on behalf of the firm 10. Umesh agreed to take over Mrs. umesh ‘s loans at Rs. 10,000 .show necessary ledger accounts

2. Amit and Baboo sharing profit and loss in the ration of 6:4 agreed upon the dissolution of the firm on 31st march 01 on which date their balance sheet was as under : Liabilities Amount Assests Amount Trade creditors 80,000 Cash 6,000 Bills payable 25,000 Bank 30,000 Loan from Mrs.Amit 15,000 Stock 80,000 Joint life policy Reserve 10,000 Book debts 66,000 Reserve 24,000 Less: provision (6,000) 60,000 Profit and loss A/c 11,000 Plant and machinery 30,000 Amit capital 84,000 Land and building 33,000 Baboo capital 26,000 Joint life policy 10,000 (at surrender value) Goodwill 15,000 Pre.insurance 1,000 Deferred advt. exp. 10,000 2,75,000 2,75,000 The firm was dissolved on the given date and the following transaction took place : 1. Baboo undertook to pay Mrs.Amit ‘s loan 2.Amit took over 50% of the stock at discount of 20 percent 3.Remaining stock was sold off at a profit of 30% on cost 4.Rs. 12,000 of the book debts proved bad 5. Land and building realised Rs. 1,40,000 1 OMTEX - CLASSES

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DISSOLUTION

ACCOUNTS NOTES

6. Half of the trade creditors accepted plant and machinery at an agreed valuation of 10% less than book value and cash of Rs.5,000 in full settlement of their claims 7. Remaining trade creditors were paid out at a discount of 10% 8. Bills payable were paid in full 9. Realisation expenses were Rs. 5,000 10. Zahir khan an old customer whose account was written off as bad in the previous year paid Rs.500 which is not included in the above stated book debts 11. A contingent liability of Rs. 1,000 was also discharged. Prepare realisation account , bank account and partner’s capital accounts. 3. Jack , Rose and thomus decided to dissolve the firm on 31st march, 01, on which date their balance sheet was as under: Liabilities Amount Assests Amount Account payable 40,000 Land and building 1,00,000 Bank O/D 14,000 Office equipment 10,000 B’s loan 40,000 Stock 80,000 Joint life policy reserve 36,000 Account receivable 60,000 Jack’s capital 54,000 Joint life policy 36,000 Rose’s capital 68,000 Bank 12,000 Thomus capital 46,000

2,98,000

2,98,000

Additional information: 1. The joint life policy was surrendered to the insurance company. The company paid a sum of Rs. 23,000 after deducting an amount of Rs. 13,000 toward loan and interest thereon by Rose’s against the policy. 2. Office equipment was accepted by a creditors of Rs. 14,000 at 60% of the book value and the balance was paid to him by cheque 3. Bankers accepted stock worth Rs. 10,000 and the balance in cash. 4. The firm purchased 400 convertible debentures of leasing company in 1994. After sometime, the investment was treated bad and was written off. These debentures were found to be having a market value of Rs. 24,000 and were accepted by a creditor at this value. 5. Assests realised , land and building Rs.3,00,000 more , remaining stock Rs. 60,000 , account receivable 66-2/3% 6. All the liabilities were paid off . creditors allowed a discount of Rs. 400 7. Realisation expenses amounted to Rs. 1,800 Prepare the realisation account, bank account and capital account of the partners. 4. On June30,2001 the balance sheet of the partnership business of Bhim and Duryodhan sharing profits and losses in the ratio of 3:2 stood as under : Liabilities Amount Assests Amount Loan from Duryodhan 15000 Building ,plant and machinery 36,000 Interest accrued 400 15,400 Car 4,000 Sundry creditors 12,500 Scooter 2,000 Bank over draft 7,980 Investment 16,000 Bhim capital accounts 37,580 Stocks 20,000 Duryodhan capital accounts 22,040 Book debts 17,500 95,500 95,500 2 OMTEX - CLASSES

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DISSOLUTION

ACCOUNTS NOTES

1. Bhim and Duryodhan dissolved the partnership on that date. 2. Building ,plant and machinery and stock were sold to Mahabharat Ltd. in consideration of Rs. 1,00,000 satisfied by cash payment of Rs.55,000 & balance by allotment of 4,500 equity shares of Rs.10 each 3.Bhim took over the car at a valuation of Rs.4,250 and duryodhan the scooter for Rs. 1,750 4. Duryodhans loan together with the interest accrued thereon was transferred to his capital account 5. cash realisation was :i. On the sale of investment Rs. 14,000 and ii. Book debts of Rs.16,500 while the creditors were settled for Rs. 12,000 6. Costs of realization were Rs. 750 while bank charged interest of Rs.400 7. Shares in Mahabharat Ltd. were sold in the market at par you are required to prepare:1. Realisationaccount 2. Bank account 3. Partner’s capital account showing the settlement of them

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DISSOLUTION

ACCOUNTS NOTES

5.

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