Important Questions Class 12 Accountancy Chapter 6 Dissolution Of a Partnership Firm

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CBSE Class 12 Accountancy Important Questions Chapter 6 Dissolution Of a Partnership Firm

1. Distinguish between Dissolution of Partnership and Dissolution of partnership firm
   Ans. 

   Dissolution of Partnership	Dissolution of partnership firm
   a) The Partnership is dissolved but the business continue. The Business is not terminated	a) The firm winds up the business.
   b) Assets and liabilities are revalued through revaluation account and the Balance sheet is prepared	b) Assets are sold and the liabilities are paid off through Realisation account.
   c) The Books of accounts are not closed as the business is not terminated.	d) The Books of accounts are closed.

2. State the provisions of Section 48 of the Partnership Act 1932 regarding settlement of Accounts during the Dissolution of Partnership firm.
   Ans. According to section 48— 
   1. a) Losses including the deficiencies of Capitals are to be paid-
      1. First out of profits
      2. Next out of Capitals of the partners
      3. Lastly if required, by the partners individually in their profit sharing ratio (as their liability is unlimited)
   2. The Assets of the firm and the amount contributed by the partners to make up the deficiency of capital shall be applied for –
      1. First to pay the debts of the firm to the third parties.
      2. Next, Partners Loan(Partner has advanced to the firm)
      3. Partners capitals
      4. The residue, if any shall be distributed among the partners in their profit sharing ratio.
3. Distinguish between Realisation account and Revaluation account
   Ans. 

   Realisation Account	Revaluation Account
   a) It is prepared in the case of Dissolution of Partnership firm	a)It is prepared in the case of Dissolution of Partnership.
   b) This account is prepared to realise the assets & pay off the liabilities	b) This Account is prepared to revalue the assets and liabilities during Admission, Retirement and Death of the partner.

4. A and B are partners sharing profits and losses equally. They decided to dissolve their firm. Assets and Liabilities have been transferred to Realisation Account. Pass necessary Journal entries for the following.Journal
   

   SN	Particulars	LF	Debit(Rs)	Credit(Rs)
   a)	Realisation account -Dr A’s Capital account (Being commission given to A)		4000	4000
   b)	A‘s Capital account –Dr		14000
   	B‘s Capital account –Dr		14000
   	Advertisement Suspense account (Being Advertisement suspense written off)			28000
   c)	Realisation account –Dr		13000
   	Cash account			13000
   	(Being creditors paid off)
   d)	B‘s Capital account –Dr		4900
   	Realisation account			4900
   	(Being asset taken over by the partner)
   e)	A‘s Loan account –Dr		15000
   	Cash account			15000
   	(Being partners loan paid off)
   f)	Realisation account — Dr		12000
   	Cash account			12000
   	(Being Bank loan paid off)

   1. A was to bear all the expenses of Realisation for which he was given a commission of Rs 4000.
   2. Advertisement suspense account appeared on the asset side of the Balance sheet amounting Rs 28000
   3. Creditors of Rs 40,000 agreed to take over the stock of Rs 30,000 at a discount of 10% and the balance in cash.
   4. B agreed to take over Investments of Rs 5000 at Rs 4900
   5. Loan of Rs 15000 advanced by A to the firm was paid off.
   6. Bank loan of Rs 12000 was paid off.
5. X and Y are partners in the firm who decided to dissolve the firm. Assets and Liabilities are transferred to Realisation account. Pass necessary journal entries-
   1. Creditors were Rs100,000. They accepted Building valued Rs 1,40,000 and paid cash to the firm Rs 40,000
   2. Aman an old customer whose account of Rs 1000 was written off as bad in the previous
   3. year paid 40% of the amount.
   4. There were 300 shares of Rs 10 each in ABC Ltd which were acquired for Rs 2000 were now valued at Rs 6 each. These were taken over by the partners in the profit sharing ratio.
   5. Profit on Realisation Rs 42000 was divided among the partners.
   6. Land and Building (Book value Rs 1, 60,000) was sold for Rs 3,00,000 through a broker who charged 2% commission on the deal.
   7. Plant and machinery (Book value Rs 60,000) was handed over to the creditor in full settlement of his claim.

   S.N	Particulars	LF	Debit (Rs)	Credit (Rs)
   a)	Cash account –Dr		40000
   	Realisation account			40000
   	(Being cash received from the creditor)
   b)	Cash a/c –Dr		400
   	Realisation a/c			400
   	(Being cash received from a debtor whose account was written off earlier)
   c)	X‘s Capital a/c –Dr		900	1800
   	Y‘s Capital a/c –Dr		900
   	Realisation a/c
   	(Being Investments taken over by the partners)
   d)	Realisation a/c –Dr		42000
   	X‘s Capital a/c			21000
   	Y‘s capital a/c			21000
   	(Being profit on Realisation distributed among the partners)
   e)	Cash a/c—Dr		294000
   	Realisation a/c			294000
   	(Being Land and Building realized)
   f)	NO JOURNAL ENTRY

LONG QUESTIONS—6-8 Marks

6. Following is the Balance sheet of Karan and Sandeep who share profits and losses equally as on 31st march 2010
   

   Liabilities	Rs	Assets	Rs
   Capitals–		Bank	40,000
   Karan	1,00,000	Debtors	25,000
   Sandeep	50,000	Stock	35,000
   Creditors	30,000	Machinery	60,000
   Workmen compensation fund	15,000	Furniture	40,000
   Bank loan	5000
   	2,00,000		2,00,000

   The firm was dissolved on the above date.

   1. Karan agreed to take over 50% of the stock at 10% less on its book value, the remaining stock was sold at a gain of 15%. Furniture and machinery realized for Rs 30,000 and 50,000 respectively.
   2. There was unrecorded Investments which was sold for Rs 25,000.
   3. Debtors realized Rs 31,500 (with interest) and Rs 1200 was recovered for bad debts written off last year.
   4. There was an outstanding bill for repairs which had to be paid Rs 2000.
      Prepare necessary Ledger accounts to close the books of the firm.

   Ans. Realsation account

   Particulars	Rs	Particulars	Rs
   Sundry assets		Liabilities:
   Debtors-25000		Creditors : 30,000
   Stock-35,000		Bank loan : 5000	35000
   Furniture-40,000
   Machinery-60,000	1,60,000
   Bank	2000	Karan‘s Capital a/c	15750
   a/c(outstanding repair bill)
   Bank(Creditors &		Bank a/c(stock)	20125
   Bank loan)	35,000
   Capital accounts		Bank a/c(Assets	80,000
   Karan : 5787.5		realized)
   Sandeep: 5787.5
   	11575	Bank a/c(Debtors)	32700
   		Bank a/c(Investments)	25,000
   	208575		208575

   Partners Capital accounts

   Particular	Karan	Sandeep	Particulars	Karan	Sandeep
   Realisation a/c(stock)	15750		Balance b/d	1,00,000	50,000
   			Workmen‘s compensation fund	7500	7500
   Bank account	97537.5	63287.5	Realisation a/c	5787.5	5787.5
   	113287.5	63287.5		113287.5	63287.5

   Bank account

   Particulars	Amount	Particular	Amount
   Balance b/d	40,000	Realisation a/c  (repair bill, creditors and bank loan)	37000
   Realisation a/c( stock)	20125	Karan‘s capital	97537.5
   Realisation a/c(Machinery & furniture)	80,000	Sandeep‘s capital	632875.5
   Realisation a/c(Debtors)	32700
   Bank(Investments)	25,000
   	197825		197825

7. Following is the Balance sheet of X and Y who share profits in the ratio of 4:1 as on 31^st march 2010Balance Sheet
   

   Liabilities	Rs	Assets	Rs
   Sundry Creditors	8,000	Bank	20,000
   Bank overdraft	6,000	Debtors 17,000	15,000
   		Less provision 2000
   X‘s Brother‘s loan	8,000	Stock	15,000
   Y‘s Loan	3,000	Investments	25,000
   Investment  Fluctuation fund	5,000	Building	25,000
   Capitals- X-50,000  y-40,000	90,000	Goodwill	10,000
   		Profit and Loss a/c	10,000
   	1,20,000		1,20,000

   The firm was dissolved on the above date and the following was decided—

   1. X agreed to pay off his brother‘s loan
   2. Debtors of Rs 5000 proved bad.
   3. Other assets realized as follows—Investments 20% less, and Goodwill at 60%.
   4. One of the creditors for Rs 5000 was paid only Rs 3000.
   5. Building was auctioned for Rs 30,000 and the auctioneer‘s commission amounted to Rs 1000.
   6. Y took over part of the stock at Rs 4000(being 20% less than the book value)Balance stock realized 50%
   7. Realisation expenses amounted to Rs 2000.

   Prepare Realisation account, Partners capital accounts and Bank account.
   Ans.
   Realisation account

   Particulars	Amt(Rs)	Particulars	Amt(Rs)
   Sundry Assets		Sundry Liabilities
   Debtors 17,000		Creditors – 8000
   Stock 15,000		Bank overdraft – 6000
   Investments 25,000		X‘s Brothers loan- 8000
   Building 25,000	92,000	Investment Fluctuation
   Goodwill 10,000		fund – 5,000	29,000
   		Provision for doubtful  debts – 2000	72,000
   X‘s Capital(Brothers  loan)	8000	Bank a/c (Assets realized)	72,000
   Bank(Liabilities paid  off) Creditors- 6000 Bank overdraft 6000	12000	Y‘s Capital(stock)  Loss transferred to capitals X- 7200 Y- 1800	4000  9000
   Bank (Realisation  expenses)	2000
   	1,14000		1,14,000

   Partner’s Capital Accounts

   Particulars	X	Y	Particulars	X	Y
   Profit & Loss a/c	8,000	2,000	Balance b/d	50,000	40,000
   Realisation a/c		4,000	Realisation a/c	8,000
   Realisation  a/c(loss)	7,200	1,800
   Bank a/c	42,800	32,200
   	58,000	40,000		58,000	40,000

   Bank account

   Particulars	Amt (Rs)	Particulars	Amt (Rs)
   Balance b/d	20,000	Y‘s loan a/c	3,000
   Realisation a/c (assets realized)	72,000	Realisation  a/c(liabilities paid off)	12,000
   		Realisation  a/c(expenses)	2,000
   		X‘s Capital a/c	42,800
   		Y‘s capital a/c	32,200
   	92,000		92,000

8. A, B and C commenced business on 1st January 2008 with capitals of Rs 50,000, 40,000 and Rs 30,000 respectively. Profits and losses are shared in the ratio of 4:3:3. During 2008 and 2009 they made profit of Rs 20,000 and Rs 25000 respectively. Each partner withdrew Rs 5000 per year.
   Ans.On 31st December 2009, they decided to dissolve the firm. Creditors and cash on that date were Rs 12,000 and Rs 2000 respectively. The Assets realized Rs 1,50,000. Creditors were settled for Rs 11,500 and realization expenses were Rs 500.
   Prepare Realisation a/c, Capital accounts and Cash account.
   Realisation account 

   Particulars	Rs	Particulars	Rs
   Sundry Assets	1,45,000	Creditors	12,000
   Cash a/c(Creditors)	11,500	Cash a/c(Assets  realized)	1,50,000
   Cash a/c(Expenses)	500
   Capital Accounts A- 2,000  B- 1,500
   C- 1,500	5,000
   	1,62,000		1,62,000

   Partners Capital Accounts

   Particulars	A	B	C	Particulars	A	B	C
   Cash a/c	60,000	45,000	35,000	Balance  b/d	58,000	43,500	33,500
   				Realisation  a/c	2,000	1,500	1,500
   	60,000	45,000	35,000		60,000	45,000	35,000

   Cash account

   Particulars	Rs	Particulars	Rs
   Balance b/d	2,000	Realisation(Creditors)	11,500
   Realisation a/c	1,50,000	Realisation a/c(expenses)	500
   		A‘s Capital a/c	60,000
   		B‘s Capital a/c	45,000
   		C‘s Capital a/c	35,000
   	1,52,000		1,52,000

   Working Note: Calculation of Closing capital (Capital as on 31/12/2009)

   Particulars	A	B	C
   Opening Capital	50,000	40,000	30,000
   Add Profits(of two yrs)	18,000	13,500	13,500
   Less Drawings(of 2 yrs)	10,000	10,000	10,000
   Closing Capital	58,000	43,500	33,500

   Memorandum Balance sheet as on 31/12/2009

   Liabilities	Rs	Assets	Rs
   CapitalsX-  58000 Y-43500 Z-33500	1,35,000	Cash	2000
   Creditors	12,000	Sundry  Assets(Balancing fig)	1,45,000
   	1,47,000		1,47,000