Question

Sangeeta, Anita, and Smita were in partnership sharing profits and losses in the ratio 2 : 2 : 1. Their Balance Sheet as of 31st March 2019 was as under:

Balance Sheet as of 31st March 2019

They decided to dissolve the firm as follows:

1. Assets realised as; Land recovered ₹ 1,80,000; Goodwill for ₹ 75,000; Loans and Advance realised ₹ 12,000; 10% of the Debts proved bad.

2. Sangeeta took Plant at book value.

3. Creditors and Bills payable paid at 5% discount.

4. Sandhya’s loan was discharged along with ₹ 6,000 as interest.

5. There was a contingent liability in respect of bills of ₹ 1,00,000 which was under discount. Out of them, a holder of one bill of ₹ 20,000 became insolvent.

Show Realisation Account, Partners’ Capital Account, and Bank Account.

Answer 1

In the books of Sangeeta, Anita, and Smita

Realisation Account

Partner's Capital Accounts

Bank Account

Working Notes:

1. Amount paid towards Sandhya’s Loan = Loan amount + Interest due on loan

= 1,20,000 + 6,000

= ₹ 1,26,000

2. Amount received from Debtors = Debtors – Bad debts

= 1,25,000 – 10% of 1,25,000 

= 1,25,000 – 12,500 

= ₹ 1,12,500

3. Amount paid to Creditors = Creditor – 5% discount

= 1,20,000 – 5% on 1,20,000

= 1,20,000 – 6,000

= ₹ 1,14,000

4. Amount paid towards Bills payable = Bills payable – 5% discount 

= 20,000 – 5% on 20,000 

= 20,000 – 1,000 

= ₹ 19,000

5. Bill of ₹ 1,00,000 was discounted with the Bank. On the due date, bank could not recover ₹ 20,000 from one bill holder as he was declared insolvent. 

Therefore, we are required to settle that contingent liability of ₹ 20,000.