4. Pannalal, Babulal and Hiralal were partners sharing profits and losses in the proportion of 2: 2: 1. Following is their Balance Sheet as on 31st March, 2008: (Textbook Problem No. 6)

Balance Sheet as on 31^st March, 2008

Liabilities	Amount	Amount	Assets	Amount	Amount
Capital A/c			Machinery		25000
Pannalal		30000	Stock		10000
Babulal		10000	Debtors	27500
Hiralal		10000	(-) R.D.D.	-1500	26000
General Reserve		3000	Investments		12000
Creditors		20000	Profit & Loss A/c		9000
Pannalal’s Loan A/c		4000	Bank		2000
Bills Payable		7000
		84000			84000

On the above date the partners decided to dissolve the firm:

1. Assets were realised: Machinery Rs. 22500, Stock Rs. 9000, Investments Rs. 10,500, Debtors Rs. 22500.

2. Dissolution expenses were Rs. 1,500.

3. Goodwill of the firm realised Rs. 12000.

Pass the necessary Journal Entries in the Books of the firm.

Solution:

Journal Entries in the books of the firm.

Date	Particulars	L.F.	Debit	Credit
31.3.2008	General Reserve A/c   ……. Dr.		3000
	To Pannalal’s A/c			1200
	To Babulal’s A/c			1200
	To Hiralal’s A/c			600
	[Being balance in general reserve transferred ]
31.3.2008	Pannalal’s Capital A/c    ……. Dr.		3600
	Babulal’s Capital A/c    ……. Dr.		3600
	Hiralal’s Capital A/c    ……. Dr.		1800
	To Profit & Loss A/c			9000
	[Being Accumulated losses transferred]
31.3.2008	Realisation A/c    ……. Dr.		74500
	To Machinery A/c			25000
	To Stock A/c			10000
	To Debtors A/c			27500
	To Investments A/c			12000
	[Being assets transferred to Realisation A/c at their book value]
31.3.2008	Creditors A/c    ……. Dr.		20000
	Bills Payable A/c    ……. Dr.		7000
	R.D.D. A/c    ……. Dr.		1500
	To Realisation A/c			28500
	[Being outsiders liabilities transferred to Realisation A/c at their book value)
31.3.2008	Bank A/c    ……. Dr.		76500
	To Realisation A/c			76500
	[Being assets were realised]
31.3.2008	Realisation A/c    ……. Dr.		28500
	To Bank A/c			28500
	[Being outsiders liabilities and realisation expenses paid]
31.3.2008	Pannalal’s Loan A/c    ……. Dr.		4000
	To Bank A/c			4000
	[Being Partners loan paid ]
31.3.2008	Realisation A/c    ……. Dr.		2000
	To Pannalal’s Capital A/c			800
	To Babulal’s Capital A/c			800
	To Hiralal’s Capital A/c			400
	[Being Profit on realisation is recorded]
31.3.2008	Pannalal’s Capital A/c    ……. Dr.		28400
	Babulal’s Capital A/c    ……. Dr.		8400
	Hiralal’s Capital A/c    ……. Dr.		9200
	To Bank A/c			46000
	[Being the final settlement is made]