7. Dissolution of a Partnership firm

  1. What Journal entry will be passed when the unrecorded furniture of Rs.20,000 is taken by X, a partner at Rs.15,000 on the dissolution of the firm?

Solution-

2. Land and building (Book value) ₹ 1,60,000 sold for ₹ 3,00,000 through a broker who changed 2% commission on the deal. Journalize the transaction, at the time of dissolution of the firm.

Solution:-

Working notes:-

Realization amount = 3,00,000 – 3,00,000 x 2/100

                                                 = 2,94,000

3.  a)  Pass the journal entry when an unrecorded liability of

₹ 15,000 is settled at ₹ 10,000 and paid by X ,a partner  on the dissolution of a firm?

(b) Pass a journal entry if a machine having a book value

of ₹ 15,000 is given to Rakesh, a creditor of ₹ 22,000 for  ₹ 12,000 towards part payment of his dues?

4. If a Loan from X, a partner, of Rs.22,000 exists in the liabilities side of the Balance Sheet of the firm and X’s Capital Account has a debit balance of Rs.2,000.

What Journal entry will you pass on payment of such a loan?

Solution-

5. Pass journal entries in the following case?

  1. Expenses of realization ₹ 600 to be borne by the firm and are paid by Mohan, a partner.
  2.  Mohan, one of the partners of the firm, was asked to carry out dissolution of the firm for which he was allowed a salary of ₹ 20,000. Expenses for dissolution were ₹ 5,000.
  3. Motor car of book value ₹ 50,000 taken by a creditor for ₹ 40,000 in settlement.

Solution:-

6. Pass journal for the following :

  1. Realization expenses of ₹ 10,000 were to be borne by Raman, a partner, but were paid by the firm.
  2. Mahesh, a partner, was paid ₹ 25,000 and he was to bear the expense
  3. Suresh, a partner, was paid ₹ 20,000 and he was to bear the expenses. Firm paid an expense of ₹ 5,000. 

Solution:-

7. Pass journal entries for the following:

  1. Firm agreed to pay Alok ₹ 7,500 towards dissolution expenses. Dissolution expenses were ₹ 10,000, which were paid by the firm.
  2. Realization express were ₹5,000. It was agreed that the firm will bear ₹2,000 and balance by Ravi, a partner.
  3. Dissolution expenses of ₹ 10,000 were paid by Amit, a partner, on behalf of the firm.
  4. Realisation expenses up to ₹ 6,000 was agreed by the firm to reimburse Ajay. Dissolution expenses were ₹7,000.

Solution-

8. Pass necessary journal entries in the following cases:

  1. Creditors of ₹85,000 accepted ₹40,000 in cash and Investment of ₹43,000, in full settlement of their claim.
  2. Creditors were ₹ 16000. They accepted Machinery valued at ₹ 18,000 in settlement of their claim.
  3. Creditors were ₹ 90,000. They accepted Building valued at 1,20,000 and paid cash to the firm ₹  30,000.

Solution:

9. Charu Dhwani, Iknoor and Paavni were partners in a firm. They had enterd into partnership firm last year only, through a verbal agreement. They contributed Capitals in the firm and to meet other financial requirements, few partners also provided loan to the firm. Within a year, their conflicts arisen due to certain disagreements and they decided to dissolve the firm. The firm had appointed Ms. Kavya, who is a financial advisor and legal consultants, to carry on the dissolution process. In the first instance, Ms Kavya had transferred various assets and external liabilities to Realization Account. Due to her busy schedule; Ms. Kavya has delegated this assignment to you, being an intern in her firm. On the date of dissolution you have observed the following transactions:

  1. Dhwani’s Loan of ₹ 50,000 to the firm was settled by paying ₹42,000
  2. Paavni’s Loan ₹ 40,000 was settled by giving an unrecorded asset of ₹ 45,000
  3. Loan to Charu of ₹60,000 was settled by payment to charu’s brother loan of the same amount .
  4. Iknoor’s Loan of ₹80,000 to the firm an she took over Machinery of ₹ 60,000 as part payment.

You are required to pass necessary entries for all the above mentioned transactions.

Solution:

10. Pass journal entries for the following at the time of dissolution of the firm of X and Y after the assets (other than cash) and outside liabilities have been transferred to Realization Account:

  1. Sale of Assets – ₹ 50,000.
  2. Payment of Liabilities – 10,000.
  3. A commission of 5% was allowed to X, a partner, on sale of assets.
  4. Realization expenses were ₹ 15,000. The firm had agreed with Amrit, to reimburse him ₹ 10,000.
  5. Employee’s provident fund ₹ 10,000 was paid.
  6. Z, a debtor, whose account of ₹6,000 was written off as earlier, paid 60% of the amount.
  7. Investment (Book Value ₹ 10,000) realized at 150%.
  8. Realization expenses were ₹ 10,000. The firm had agreed with Y, a partner, to reimburse him up to ₹ 7,500.

Solution:

11. Pass necessary journal entries for the following transactions, on the dissolution of a partnership firm of Kavita and suman on 31st March,2022, after the various assets (other than cash) and third party liabilities have been transferred to Realization Account.

  1. Kavita took over amounting to ₹ 1,00,000 at ₹ 90,000.
  2. Creditors of ₹ 2,00,000 took over plant and machinery of ₹ 3,00,000 in full settlement of their claim.
  3. There was an unrecorded asset of ₹ 23,000 which was taken over by suman at ₹17,000.
  4. Realization expenses ₹ 2,000 were paid by kavita.
  5. Bank Loan of ₹ 21,000 was paid off.
  6. Loss on dissolution amounted to ₹ 7,000.

Solution-

12. Simar, Raja and Rita were partners in a firm sharing      Profits and losses in the ratio of 2:2:1. The firm was dissolved on 31st, March, 2019. After the transfer of assets (other then cash) and external liabilities to the Realization account, the following transactions took place:

  1. A debtor whose debt of ₹ 90,000 had been written off as bad, paid ₹ 88,000 in full settlement.
  2. Creditors to whom ₹ 1,21,000 were due to be paid, accepted stock at ₹ 71,000 and the balance was paid to them by a cheque.
  3. Raja had given a loan to the firm of ₹ 18,000. He was paid ₹ 17,000 in full settlement of his loan
  4. Investment were ₹ 53,000 out of which investment of ₹ 43,000 ₹ 52,000 and the balance of the investment were sold for ₹ 12,000.
  5. Expenses on dissolution amounted to ₹ 19,000 and the same were paid by the firm.
  6. Profit on dissolution amounted to ₹ 30,000.

Pass the necessary journal entries for the above transactions in the books of the firm.

Solution:-

13. Pass necessary journal entries to record the following unrecorded assets and liabilities in the books of paras and priya :

  1. There was an old furniture in the firm which had been written off completely in the books. This was sold for ₹ 3,000
  2. Ashish, an old customer whose account for ₹1,000 was written off as bad in the previous year, paid 60%, of    the amount.
  3. Paras agreed to take over the firm’s goodwill (not recorded in the books of the firm,) at a valuation of 30,000.
  4. There was an old typewriter which had been written off completely from  the books. It was estimated to realize ₹ 400. It was taken by priya at an estimated price less 25%.
  5. There were   100 shares of ₹ 10 each in stat limited acquired at a cost  of ₹ 2,000 which had been written- off completely form the books. These shares are valued @ ₹ 6 each and divided among the partners in their profit-sharing ratio.

Solution:-

14. Aman and Harsh were partner in a firm, dissolved their firm. Pass necessary journal entries for the

following after assets (other than Cash and Bank) and outside liabilities had been transferred to Realization account:

  1. Furniture existed in the book at 50,000 Aman took 50% of the furniture at 10% discount.
  2. Profit & Loss Account had credit balance of ₹ 15,000 on the date of dissolution.
  3. Harsh’s loan of ₹ 6,000 was settled by paying ₹ 5,500.
  4. Firm paid realization expenses of ₹ 5,000 on behalf of Harsh, a partner.
  5. There was a cheque for ₹ 1,200 under discount. The cheque was received form soham who became insolvent and a first and final dividend of 25% was received from his estate.
  6. Creditors of ₹ 6,000, accepted stock of ₹ 5,000 at a discount of 5% and the balance in cash.

Solution:-

15. Rohit, kunal and Sarthak partners decided to dissolve Their firm. Pass necessary journal entries for the following after various assets (other than Cash and Bank) and outside liability had been transferred to Realisation Account:

  1. Kunal agreed to pay his wife’s loan of ₹ 60,000.
  2. Total Creditors of the firm were ₹ 40,000. Creditors of ₹ 10,000 were given part of furniture of book value ₹ 8,000 out of total furniture of book value ₹ 28,000 in settlement. Remaining Creditors allowed discount of 10%.
  3. Rohit had given a loan ₹ 70,000 to the firm which Rs.68,000 was paid in settlement.
  4. A machine which was not recorded in the books was taken by Kunal at ₹ 3,000 whereas its expected value was ₹ 5,000
  5. The firm had stock of Rs.2,40,000, 25% of the stock was taken over by an unrcorded creditors of Rs.70,000 in full settlement of his claim and the remaining stock was taken over by Rohit at 80% of cost.
  6. Sarthak paid the realization expenses of ₹ 16,000 and was to be paid ₹ 15,000 including expenses for completing dissolution process.

Solution:-

16. Pass necessary journal entries for the following

Transactions on the dissolution of a firm after various assets (other than cash) and outside liabilities have been transferred to Realization Account.

  1. Realization expenses of the firm amounting to ₹ 2,600 were paid by partner, Aman.
  2. A creditor of ₹ 4,500 took over stock valued at ₹ 5,200 in full settlement.
  3. An unrecorded asset realized ₹ 3,500.
  4. Remaining creditors amounting to ₹20,000 were paid at a discount of 5%
  5. Remaining stock of ₹ 30,000 was taken over by Bimal, a partner at a discount of 20%.
  6. Investment whose face value was ₹ 10,000 was realized at 40%.

Solution-

17. Pass the necessary Journal entries for the following transactions on the dissolution of the partnership firm of Tinal an Rina after the various assets (other than cash and bank) and external liabilities have been transferred to Realization Account.

(i) There was as outstanding bill for repairs for which Rs.20,000 were paid.

(ii) The firm had 100 shares of Rs.80,000. Tina took over 50% of the stock at a discount of 20% while the  remaining stock was sold off for Rs.52,000.

(iii) The firm had 100 shares of Rs.10 each which were taken over by the partners at market value of Rs.20 per share in their profit-sharing ratio of 3:2.

(iv) Realization expenses of Rs.4,000 were paid by Rina.

(v) Tina had given a loan of rs.40,000 to the firm which was duly paid.

(vi) Rina agreed to pay off her husband’s loan of Rs.10,000 at a discount of 10%.

Solution-

18. Pass necessary journal entries on dissolution of a firm in            the following cases:

  1. Dharam, a partner, was appointed to look after the process of dissolution at a remuneration of ₹ 12,000. Dissolution expenses were to be borne by the firm. Dissolution expenses ₹ 11,000 were paid by Dharam.
  2. Jay, a partner, was appointed to look after dissolution and was to be paid ₹ 15,000, including dissolution expenses. Dissolution expenses ₹ 16,000 were by Vijay, another partner on behalf of jay.
  3. Deepa, a partner, was to handle dissolution and for this work she was to be paid ₹ 7,000, in including dissolution expenses. ₹ 6,000 were paid form the firm’s bank account.
  4. Dev, a partner, agreed to do the work of dissolution for  ₹  7,500. He took of the same value as his commission. The stock had already been transferred to Realization Account.
  5. Jeev, a partner, agreed to do the work of dissolution for which he was allowed commission of ₹ 10,000. He agreed to bear the dissolution expenses. Actual dissolution expenses paid by Jeev were ₹ 12,000. These expenses were paid by Jeev by drawing cash from the firm.

Solution:-

REALISATION ACCOUNT

19. C,D and E were partners in a firm sharing profits in

Ration of 3 : 1 : 1. Their Balance Sheet as at 31st March, 2022 was as follows:

BALANCE SHEET OF C, D AND E at 31st March, 2022

On the above date, the firm was dissolved due  to certain disagreement among the partners:

  1. Machinery of          ₹ 3,00,000 were given to creditors in full settlement of their account and remaining machinery was sold for ₹ 10,000.
  2. Investment realized ₹ 2,90,000
  3. Stock was sold for ₹ 1,18,000
  4. Debtors for ₹ 20,000 proved bad.
  5. Realization expenses amount to ₹ 10,000

Prepare Realization Account.

Solution-

Realisation A/c

20. Ramesh and Umesh were partners in a firm sharing

Profits in the ratio of their capitals. On 31st March, 2025, their Balance Sheet was as follows:

On the above date firm was dissolved.

  1. Ramesh took 50% of stock at ₹ 10,000 less than book value.
  2. Furniture was taken by umesh for ₹ 50,000 and machinery was old sold for ₹ 4,50,000
  3. Creditors were paid in full.
  4. There was an unrecorded bill for repairs for ₹ 1,60,000 which was settled and paid at ₹ 1,40,000.

Prepare Realization Account.

Solution:-

21. Pradeep and Paresh partners in a firm decided to

Dissolve their partnership firm on 1st April, 2025. Pradeep was deputed to realize the assets and to pay off the liabilities. He was paid ₹ 10,000 as commission for his services. Balance Sheet of firm 31st march, 2025 was as follows:

Following terms and conditions were greed upon :

  1. Pradeep agreed to pay his wife’s loan.
  2. Investment was given to paresh for ₹ 27,000.
  3. Building realized ₹ 3,50,000
  4. Creditors were to be paid after two months, they were paid immediately at 10% p.a. discount.
  5. Realization expenses were ₹2,500

Prepare Realization Account.

Solution:-

22. Ashish and Kanav were partners in a firm sharing

            profits and losses in the ratio of 3:2. On 31st March,

            2018 their balance sheet was as follows:

BALANCE SHEET OF AHSISH AND KANAV as at 31st march, 2018

On the above date the decided to dissolve the firm.

  1. Ashish agreed to take over furniture at ₹ 38,000 and pay

Mrs.Ashish loan.

  • Debtors realized ₹ 18,500 and plant realized 10% more.
  • Kanav took over 40% the stock at 20% less than the book value. Remaining stock was sold at a gain of 10%
  • Trade creditors took over investment in full settlement.
  • Kanav agreed to take over the responsibility of completing dissolution at an agreed remuneration of ₹ 12,000 and to bear realization expense. Actual expenses of realization amount to ₹ 8,000

Prepare Realization Account.

Solution:-

Realization account, partner’s accounts and bank/cash account

23. A ,B and C were partners sharing profits and losses in      the ratio of 2:2:1. Their Balance sheet as at 31st March 2018 was as follows:

BALANCE SHEET OF A, B AND C as at 31st March, 2018

On the above date they dissolved the firm and following amount were realized:

Fixed assets ₹  6,75,000; stock ₹  3,39,000; debtors ₹ 1,35,000; creditors were paid ₹ 1,85,000 in

full settlement of their claim. Expenses on realization amount to ₹ 19,000.

Pass the necessary journal entries on the dissolution of the firm.

Solution:-

24. Mala, Neela and kala were in partnership sharing   partnership sharing profits in the ratio of 7:2:1 and                 balance sheet of the firm as at 31st march, 2025 was:

It was agreed to dissolved the partnership as on 31st march, 2024 and the terms of dissolution were­-

  1. Mala to take over the building at an agreed amount of ₹ 31,500.
  2. Neela, who was to carry on the business, to male over the goodwill, stock and debtors a t book value, the patents at ₹ 30,000 and plant at ₹ 5,000. He was also to pay the creditors.

Show ledger account recording the dissolution in the books of the firm.

Solution:-

25. Mike and Ajay are partners sharing profits and losses in ratio of the capitals. They decided to dissolve their firm on 31st, March, 2025, the date on which the

balance sheet stood as under:

Following additional information is given:

Sundry assets realized ₹14,00,000 and the liabilities were discharged as follows:

  1. Creditors due on 31s may, 2024, were paid at a discount of 3% per annum.
  2. Bills payable were discharged at a rebate of ₹ 1,000
  3. Workmen compensation claim of ₹ 40,000 was met.
  4. Expenses of dissolution amounting to ₹ 30,000 were paid.

You are required to prepare:

  1. Realization account.
  2. Partner’s capital accounts.

Solution:-

Dr.                                                      Realization A/c                                                      Cr.

26. Bale and Yala are equal partners of a firm. They Decide to dissolve their partnership on 31st march, 2025 at which date their balance sheet stood as

  1. The assets realized were:

Stock ₹ 22,000; Debtors ₹ 7,500; Machinery ₹ 16,000; Building ₹ 35,000.

b. Yale t took furniture at ₹ 9,000

c. Bale agreed to accept ₹ 2,500 in settlement of his loan account

d. Dissolution expenses were ₹ 2,500

Prepare the:

  1. Realization account;
  2. Capital accounts of partners;
  3. Loan by bale account;
  4. Bank account.

Solution:-

Dr.                                       Realization A/C                                 Cr.

27. Shilpa, meena and nanda decided to dissolve their partnership on 31stmarch, 2025. Their profit-sharing ratio was 3:2:1 and their Balance Sheet was as under:

BALANCE SHEET OF SHILPA, MEENA AND NANDA as on 31st March, 2025

It is agreed as follows:

Stock of value of ₹ 41,600 is taken over by shilpa for ₹  35,000 and she agreed to pay bank loan. The remaining stock was sold at ₹ 14,000 and debtors amounting to ₹ 10,000 realized ₹ 8,000. Loan is sold for 1,10,000. The remaining debtors realized 50% at their book value. Cost of realization amounted to ₹ 1,200. There was a typewriter not recorded in the books worth of ₹ 6,000 which were taken over by one of the creditors at this value. Prepare Realization Account, Partners’ capital Account, and Cash Account to close the book of the firm.

Solution:-

Dr.                                              Realization A/c                                      Cr.

28. A and B are partners in a firm sharing profits and Looses in the ratio of 3:2 on 31st March, 2025, their. Balance sheet was as follows:

The firm was dissolved on 31st March, 2024 and both the partners agreed to the following:

  1. A took investment at an agreed value of ₹ 8,000. He also agreed to settle loan by Mrs. A.
  2. Other assets realized as: stock – ₹ 5,000; Debtors – ₹ 18,500; Furniture – ₹4,500; Plant – ₹ 25,000.
  3. Expenses of realization came to ₹ 1,600.
  4. Creditors agreed to accept ₹ 37,000 in full settlement of their claims.

Prepare Realization Account, Partners’ Capital Account and Bank Account.

Solution:-

Dr.                                      Realization A/c                                                     Cr.

29. Balance sheet of P,Q and T as at 31st March, 2025,were sharing profits in the ratio of 5:3:1, was:

The partners dissolved the firm. Assets realized – stock ₹23,400; Debtors 50%; building and plant and Machinery 10% less than their book value. Creditors were settled for ₹32,000. There was an outstanding bill of electricity ₹ 800 which was paid. Realization expenses ₹ 1,250 were also paid.

Prepare Realization Account, partner’s Capital Accounts and Bank Account.

Solution:-                            

Dr.                              Realization  A/c                                                          Cr.

30. Ashu and Harish are partners sharing profit and losses as 3:2. They decided to dissolve the firm on 31st March, 2025. Their Balance sheet on the above date was:

Ashu is to take over the building at ₹ 95,000 and machinery and Furniture is taken over by Harish at value of Rs.80,000. Ashu agreed to meet Bank overdraft. Stock and Investment are taken by both partner in profit-sharing ratio. Debtors realized for ₹ 46,000, expenses of realization amounted to 3,000. Prepare Ledger Accounts.

Solution:-

Dr.                              Realization  A/c                                                          Cr.

31. A, B and C were equal partners. On 31st March, 2025,

Their Balance sheet stood as:

The firm was dissolved on the above date on the following terms:

  1. For the purpose of dissolution, investment were valued at ₹ 18,000 and A took over the investment at this value.
  2. Fixed assets realization ₹ 29,700 whereas stock and Debtors realized ₹ 80,000.
  3. Expenses of realization paid were ₹ 1,300.
  4. Creditors allowed discount of ₹ 800
  5. A post-dated cheque for ₹ 1,500 under discount was dishonoured as the acceptor had become insolvent and was unable to pay and hence the firm paid the bank.

Prepare Realization Account, partners’ Capital Accounts and Cash Account showing how the accounts would finally be settled among the partners.

Solution:-

Dr.                                                Cash A/c                                                                   Cr.

32. Michel Jackson and john are in partnership sharing Profits and losses in the proportions of 1/2, 1/3 and 1/6 respectively. On 31st March,2025, they decide to dissolve the firm. On this date the Balance Sheet stood as:

During the realization process, a liability under a suit for damages is settled at ₹ 20,000 as against ₹ 5,000 provided for in the books of the firm.

Land and building were sold for ₹ 40,000 and the stock and the    

Sundry Debtors realized ₹ 30,000 and ₹ 42,000 respectively. The expenses of realization amounted to ₹ 1,200.

There was a car in the firm, which was written off form the books. It was taken by Michel for ₹ 20,000. He also agreed to pay outstanding salary of ₹ 20,000 not provided in books.

Prepare Realization Account, partners’ Capital Accounts and Bank Account in the books of the firm. 

Solution:-

Dr.                                                Realization A/c                                                      Cr.

33. Prashant and Rajesh are partners in a firm sharing. Profits and losses in the ratio of 3:2 on 31st March, 2025, their Balance Sheet was:

On the date, the partners decide to dissolve the firm. Prashant took investment at an agreed value of ₹ 35,000. Other assets were realized as follows:

Sundry Debtors: full amount. The firm could realize stock at 15% less and Building was sold at ₹ 1,00,000. Compensation to employees paid by the firm was ₹ 10,000. This liability was not provided for in the above Balance Sheet.

You are required to close the books of the firm by preparing Realization Account, Partners’ Capital Accounts and Bank Account.

Solution:-

 Dr.                                               Realization A/c                                                      Cr.

34. Yogesh and Naresh were partners sharing profits equally. They dissolved the firm on 1st April, 2025. Naresh was assigned the responsibility to realize the assets and pay the liabilities at a remuneration of ₹ 10,000 including expenses. Balance Sheet of the firm as on date was as follows:

The firm was dissolved on following terms:

  1. Yogesh was to pay his wife’s loan.
  2. Debtors realized ₹ 60,060.
  3. Naresh was to take investment at an agreed value of ₹ 26,000.
  4. Creditors were payable after two months but were paid immediately at a discount of 15% p.a.
  5. A Debtor previously written off as Bad Debt paid ₹ 16,670.
  6. An unrecorded assets realized ₹ 10,000

Prepare Realization Account, partners’ Capital Accounts, partners’ Loan Account and Cash/Bank Account.

Solution:-

Dr.                                                loan to A                                           Cr.

35. Ashok, Babu and Chetan are in partnership sharing profit in the proportion of 1/2, 1/3, 1/6 respectively. They dissolve the partnership on 31st March, 2025 when the Balance Sheet of the firm is as under:

The Machinery was taken by Babu for ₹ 45,000, Ashok to over the investment and Freehold property was taken by Chetan at ₹ 55,000. The remaining Assets realized as follows:

Sundry Debtors ₹ 56,500 and Stock ₹ 36,500. Sundry Creditors were settled at ₹ 1,400 less. An office computer, not shown in the books of accounts realized ₹ 9,000. Realization expenses amount to ₹ 3,000.

Prepare Realization Account, partners’ Capital Accounts and Bank Account. 

Solution:-

Dr.                                                loan to A                                                          Cr.

36. Rita and Sobha are partners in a firm, fancy Garments exports, sharing profits and losses equally. On 1st April, 2025, the Balance Sheet of the firm was:

The firm was dissolved on the date given above. The following transactions took place:

  1. Rita took 25% of the stock at a discount of 20% in settlement of her loan.
  2. Sundry Debtors realized ₹ 54,000
  3. Sundry Creditors were paid at a discount of 10%
  4. Land and Building realized ₹ 1,20,000.
  5. Rita took the goodwill of the firm at a value of ₹30,000.
  6. An unrecorded asset of ₹ 6,900 was given in settlement of unrecorded liability of 6,000 in full settlement.
  7. Realization expenses were ₹ 5,250

Show Realization Account, partner’s Capital Account and Bank Account in the book of the firm.

Solution:- 

Dr.                                          Realization A/C                                                     Cr.

37. Arnab, Ragini and Dhrupad are partners sharing profits in the ratio of 3:1:1. Last year, conflicts arose due to certain issues of disagreements and on 31st March, 2025, they decided to dissolve the firm. On that date their Balance Sheet was as under:

BALANCE SHEET OF ARNAB, RAGINI AND DHRUPAD as 31st March, 2025

The assets were realized and the liabilities were paid as under:

  1. Arnab agreed to pay his brother’s loan.
  2. Investment realized 20% less.
  3. Creditors were paid at 10% less.
  4. Building was auctioned for ₹ 3,55,000. Commission on auction was ₹ 5,000.
  5. 50% of the stock was taken over by Ragini at market price which was 20% less than the book value and the remaining was sold at market price.
  6. Dissolution expenses were ₹8,000. ₹3,000 were to be borne by the firm the balance by Dhrupad. The expenses were paid by him.

Prepare Realization Account and partner’s Capital Accounts.

Solution:- 

Dr.                                          Realization A/C                                                     Cr.

38. Raina and Meena were partners in a firm which they dissolved on 31st March, 2025. On this date, Balance Sheet of the firm, apart realizable assets and outside liabilities showed the following:

                                                                                                                ₹

    Raina’s Capital                                                                   40,000 (Cr.)

    Meena’s Capital                                                    20,000 (Dr.)

    Profit & Loss A/c                                                   10,000 (Dr.)

    Raina’s Loan to the firm                                     15,000

    General Reserve                                                      7,000

    On the date of dissolution of the firm:

    1. Raina’s loan was repaid by the firm along with interest of ₹ 500.
    2. Dissolution expenses of ₹ 1,000 were paid by the firm on behalf of Raina.
    3. An unrecorded assets of ₹ 2,000 was taken by Meena while Raina paid an unrecorded liability of ₹ 3,000.
    4. Dissolution resulted in a loss of ₹ 60,000 from the realization of assets and settlement of liabilities.

    You are required to prepare partners’ Capital Accounts.

    Solution:-

    Dr.                                                      Partners Capital    A/c                                         Cr.

    Preparation of Memorandum Balance Sheet

    39. There are two partners Angad and Raman in a firm and their capitals are ₹ 50,000 and ₹ 40,000. The creditors are ₹ 30,000. The assets of the firm realize ₹ 1,00,000. How much will Angad and Raman receive?

      Solution:-

      Dr.                        Balance sheet (before dissolution)                            Cr.

      40. A, B and C were partners sharing profits in the ratio of 5:3:2. On 31st March, 2025, A’s Capital and B’s Capital were ₹ 30,000 and ₹ 20,000 respectively but C owed ₹  5,000 to the firm. The liabilities were ₹ 20,000. The assets of the firm realized ₹ 50,000. Prepare Realization Account, Partner’s Capital Accounts and Bank Account.

        Solution:-

        Dr.                        Balance sheet (before dissolution)                            Cr.

        41. A and B were partners sharing profits and Losses as 7/11th to A and 4/11th to B. they dissolved the partnership on 30th may, 2023. As on that date their capitals were: A ₹ 7,000 and B ₹ 4,000. There were also interest 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 realized ₹ 24,000.

          Prepare necessary accounts showing the final settlement between partners.

          Solution:-

          42. Ramu, Laxman and Bharat started business on 1st April, 2024 with capital of Rs.1,00,000, Rs.80,000 and Rs.60,000 respectively sharing profits and losses in the ratio of 4:3:3. For the year ending 31st March, 2025, the firm incurred loss of Rs.50,000. Each of the partners withdrew Rs.10,000 during the year.

            On 1st April, 2025, the firm was dissolved. Creditors of the firm stood at Rs.24,000 on that date and cash in hand was Rs.4,000. Assets realized Rs.3,00,000 and creditors were paid Rs.23,500 in settlement of their claims.

            Prepare Realization Account and show your working clearly.

            Solution-

            Dr.                                       Realisation A/c                                 Cr.

            Calculation of closing capital as at 31st March 2025

            Partner’s Capital A/c as at 31st March 2025

            43. A,B and C started business on 1st April, 2024 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, 2024, firm incurred loss of ₹ 50,000. Each of the partners withdrew ₹ 10,000 during the year.

                 On 31st March, 2025, 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 realized ₹ 3,00,000 and creditors were paid ₹ 23,500 in full settlement of their claims.

              Prepare Realisation Account and show you workings clearly.

              Solution:-

              Dr.                                                Realization A/c                                                      Cr.

              44. Priya, Komal and Rakhi were in partnership sharing profits and losses in the ration of 2:1:1. They decided to dissolve the partnership. On that date of dissolution, Sundry Assets (including cash ₹ 5000) amounted to ₹ 88,000 assets realized ₹  80,000 was paid by the firm. The capital Account of Priya, Komal and Rakhi  showed a balance of ₹ 20,000 each.

                Solution:-                        Balance sheet (before dissolution)   

                45. The partnership between A and B was dissolved on 31st March, 2025. 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 in the proportions of 2/3 to A, 1/3 to B.

                  The assets represented by the above stated net liabilities realized ₹ 4,50,000 exclusive of owed by B. The liabilities were settled at book figures. Prepare Realization Account, Partner’s Capital Account and Cash Account showing the distribution to the partners.

                  Solution:-Balance sheet (before dissolution)               

                  Dr.                                          partner’s Capital A/c                                                       Cr.

                  46. X and Y were partners sharing profits and losses in the ratio of 3:2. They decided to dissolve the firm on 31st March, 2025. On that date, their Capitals were X- ₹ 40,000 and Y-30,000. Creditors amounted to ₹ 24,000.

                    Assets were realized for ₹ 88,500. Creditors of ₹ 16,000 were taken over by X at ₹ 14,000. Remaining creditors were paid at ₹ 7,500. The cost of realization came to ₹ 500.

                    Prepare necessary accounts.

                    Solution:-                             Balance sheet (before dissolution)               

                    Dr.                                          partner’s Capital A/c                                            Cr.

                    47. P, Q and R are partners sharing profits and losses in the ratio of 3:3:2. Their respective capitals are in their profits-sharing proportions. On 1st April, 2024, the total capital of the firm and balance of General Reserve are ₹  80,000 and ₹  20,000 respectively. During the year 2024-25, the firm earned 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, 2025, their liabilities were ₹ 18,000.

                      On this date, they decided to dissolve the firm. The assets realized ₹ 1,08,600 and realization expenses amounted to ₹ 1,800.

                      Prepare necessary Ledger Accounts to close the books of the firm.

                      Solution:-                 Calculation  of closing capital of the partners

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