A and B were partners sharing profits and losses as to 7/11th to A and 4/11th to B. They dissolved the partnership on 30th May, 2018. As on that date their capitals were: A ₹ 7,000 and B ₹ 4,000. There were also due on Loan A/c to A ₹ 4,500 and to B ₹ 750. The other liabilities amounted to ₹ 5,000. The assets proved to have been undervalued in the last Balance Sheet and actually realised ₹ 24,000.
Prepare necessary accounts showing the final settlement between partners.
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and to B ₹ 750. The other liabilities amounted to ₹ 5,000. The assets proved to have been undervalued in the last Balance Sheet and actually realised ₹ 24,000.
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The Realisation Account, Partner’s Capital Accounts and Cash Account are calculated and prepared below:
Explanation:
Calculating Realisation Account :
- It is obtained by moving all assets to the debit side of the account except Cash or Bank account.
- Transferring all the liabilities to the credit side of the account except Partner's Loan Account and Partners' Capital Accounts.
- Crediting the receipt on the account's sale of assets.
Calculating Partner's Capital Account:
The opening capital account balance of a partner usually exceeds the amount of its contribution to the partnership. (i.e. cash + the total value of any qualified property).
Here,
As per the Partner's Capital Account,
The Dr. and the Cr. of A and B are Rs. 8,750 and Rs. 5,000 respectively.
As per the Partner's Loan Account,
The Dr. and the Cr. of A and B are Rs. 4,500 and Rs. 750 respectively.
As per the Cash Account,
An amount of Rs. 8,750, Rs. 5000, Rs. 4500, Rs. 750 and Rs. 5000 has been debited from the A and B's capital account, A and B's loan account and the Realisation account respectively and it has been credited an amount of Rs. 24,000 to the Realisation account (assets).
The Realisation account and the Memorandum balance sheet as on 30th may 2018 are prepared and calculated below:
