A, B and C started business on 1st April, 2016 with capitals of ₹ 1,00,000; ₹ 80,000 and ₹ 60,000 respectively sharing profits (losses) in the ratio of 4 : 3 : 3. For the year ended 31st March, 2017 the firm suffered a loss of ₹ 50,000. Each of the partners withdrew ₹ 10,000 during the year.
On 31st March, 2017, the firm was dissolved, the creditors of the firm stood at ₹ 24,000 on that date and Cash in Hand was ₹ 4,000. The assets realised ₹ 3,00,000 and Creditors were paid ₹ 23,500 in full settlement of their claims.
Prepare Realisation Account and show your workings clearly.
Answers
creditors of the firm stood at ₹ 24,000 on that date and Cash in Hand was ₹ 4,000. The assets realised ₹ 3,00,000 and Creditors were paid ₹ 23,500 in full settlement of their claims.
Prepare Realisation Account and show your workings clearly.
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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, B and C are Rs. 1,18,200, Rs. 91,150 and Rs. 71,150 respectively.
As per the Cash Account,
An amount of Rs. 23500, Rs. 1,18,200, Rs. 91,150 and Rs. 71,150 has been debited from the Realisation A/c, A, B and C's capital A/c respectively and it has been credited an amount of Rs. 4000 and Rs. 3,00,000 to the Balance b/d and the Realisation account respectively.
Calculation of Partner's capital as on March 31, 2017
Capital as on April 01, 2017 = Capital as on April 01, 2016 - Drawings - Share of Loss
The share of loss of A, B and C are in the ratio of 4 : 3 : 3 respectively.
For A, Capital as on April 01, 2017
= 1,00,000 - 10,000 - 20,000 = Rs. 70,000
For B, Capital as on April 01, 2017
= 80,000 - 10,000 - 15,000 = Rs. 55,000
For C, Capital as on April 01, 2017
= 60,000 - 10,000 - 15,000 = Rs. 35,000
The Realisation account and the Memorandum balance sheet are prepared and calculated below:
