Ganesh and Chandan were partners sharing profits and losses in the proportion of 3:2. They dissolve partnership firm on 31st March, 2011 when their position was as follows:



Balance Sheet as on 31st March, 2011

Liabilities
Amount
Amount
Assets
Amount
Amount
Sundry Creditors

25000
Debtors
112500

Bank Overdraft

20000
Less: R.D.D.
-12500
100000
Reserve Fund

30000
Stock

225000
Capital A/c


Furniture

50000
Ganesh

230000
Motor Car

75000
Chandan

150000
Cash in Hand

5000


455000


455000
 The Assets realised as follows: Debtors Rs. 90,000, Stock Rs. 2,00,000, and Goodwill Rs. 25000,, Motor Car was taken over by Ganesh for Rs. 70,000 and Furniture by Chandan for Rs. 60,000.
The Creditors were paid Rs. 22500 in full settlement. The expenses of realisation amounted to Rs. 10,000.
Pass necessary journal entries in the books of the firm.

Solution:

In the Journal of Partnership Firm



Date
Particulars
LF
Debit
Credit
31.3.2011
Realisation A/c ....Dr.

462500


To Debtors A/c


112500

To Stock A/c


225000

To Furniture A/c


50000

To Motor Car A/c


75000

[Being assets transferred at their book values to Realisation A/c ]



31.3.2011
Sundry Creditors A/c ....Dr.

25000


Bank Overdraft A/c ....Dr.

20000


To Realisation A/c


45000

[Being external liabilities transferred at their book valued to realisation A/c ]



31.3.2011
R.D.D. A/c ....Dr.

12500


To Realisation A/c


12500

[Being R.D.D. transferred to Realisation A/c ]



31.3.2011
Reserve Fund A/c ....Dr.

30000


To Ganesh's Capital A/c


18000

To Chandan's Capital A/c


12000

[Being Balance in reserve transferred to Capital A/c in their profit sharing ratio]



31.3.2011
Cash A/c ....Dr.

315000


To Realisation A/c


315000

[Being assets realised into cash]



31.3.2011
Ganesh's Capital A/c ....Dr.

70000


Chandan's Capital A/c ....Dr.

60000


To Realisation A/c


130000

[Being Motor car and furniture taken over by the partners respectively]



31.3.2011
Realisation A/c ....Dr.

42500


To Cash A/ c


42500

[Being creditors and Bank overdraft paid in cash ]



31.3.2011
Realisation A/c ....Dr.

10000


To Cash A/c


10000

[Being expenses of realisation paid in cash]



31.3.2011
Ganesh's Capital A/c ....Dr.

7500


Chandan's Capital A/c ....Dr.

5000


To Realisation A/c


12500

[Being loss incurred on realisation adjusted to Partners' Capital A/c in the ratio of 3:2]



31.3.2011
Ganesh's Capital A/c ....Dr.

170500


Chandan's Capital A/c

97000


To Cash A/c


267500

[Being balance in capital A/c paid]