P, Q and R are three partners sharing profits and losses in the ratio of 3 : 3 : 2 respectively. Their respective capitals are in their profit-sharing proportions. On 1st April, 2017 the total capital of the firm and the balance of General Reserve are ₹ 80,000 and ₹ 20,000 respectively. During the year 2017-18 the firm made a profit of ₹ 28,000 before charging interest on capital @ 5%. The drawings of the partners are P ₹ 8,000; Q ₹ 7,000; and R ₹ 5,000. On 31st March, 2018 their liabilities were ₹ 18,000.
On this date, they decided to dissolve the firm. The assets realised ₹ 1,08,600 and realisation expenses amounted to ₹ 1,800.
Prepare necessary Ledger Accounts to close the books of the firm.
Answers
The Realisation Account, Profit and Loss Appropriation A/c, 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 P, Q and R are Rs. 48,000, Rs.48,000 and Rs. 32,000 respectively.
As per the Cash Account,
An amount of Rs. 19,800, Rs. 32,800, Rs. 33,800 and Rs. 22,200 has been debited from the realisation A/c (Creditors), P, Q and R's capital A/c respectively and an amount of Rs. 1,08,600 has been credited to the Realisation account (assets).
The Realisation account, Profit and Loss Appropriation A/c and the Memorandum balance sheet are prepared and calculated below:
