The partnership between A and B was dissolved on 31st March, 2018. On that date the respective credits to the capitals were A ₹ 1,70,000 and B ₹ 30,000. ₹ 20,000 were owed by B to the firm; ₹ 1,00,000 were owed by the firm to A and ₹ 2,00,000 were due to the Trade Creditors. Profits and losses were shared in the proportions of 2/3 to A, 1/3 to B.
The assets represented by the above stated net liabilities realise ₹ 4,50,000 exclusive of ₹ 20,000 owed by B. The liabilities were settled at book figures. Prepare Realisation Account, Partners Capital Accounts and Cash Account showing the distribution to the partners.
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The assets represented by the above stated net liabilities realise ₹ 4,50,000 exclusive of ₹ 20,000 owed by B. The liabilities were settled at book figures. Prepare Realisation Account, Partners
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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. 1,70,000 and Rs. 30,000 respectively.
As per the Cash Account,
An amount of Rs. 2,00,000, Rs. 1,50,000 and Rs. 1,00,000 has been debited from the realisation A/c (Creditors), A's capital A/c and A's loan A/c respectively and it has been credited an amount of Rs. 4,50,000 to the Realisation account (assets).
The Realisation account and the Memorandum balance sheet are prepared and calculated below:
