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 31st 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]