Question

A, B and C were in partnership sharing profits and losses in the ratio of 2 : 1 : 1. They decided to dissolve the partnership. On that date of dissolution, Sundry Assets (including cash ₹ 5,000) amounted to ₹ 88,000, assets realised ₹ 80,000 (including an unrecorded asset which realised ₹ 4,000). A contingent liability on account of bills discounted ₹ 8,000 was paid by the firm. The Capital Accounts of A, B and C showed a balance of ₹ 20,000 each.
Prepare Realisation Account, Partners Capital Accounts and Cash Account.

Answer 1

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. 20,000 each respectively.

As per the Cash Account,

An amount of Rs. 36,000, Rs. 14,500, Rs. 17,250 and Rs. 17,250 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. 5,000 and Rs. 80,000 to the Balance b/d and the Realisation account respectively.

The Realisation account and the Memorandum balance sheet are prepared and calculated below: