T.S. Grewal Class 12 Chapter 7 Q.25 - Dissolution of a Partnership Firm

Question 25

Mike and Ajay are partners sharing profits and losses in the ratio of their capitals. They decided to dissolve their firm on 31st March, 2025. Their Balance Sheet showed Capitals – Mike ₹6,00,000, Ajay ₹4,00,000; Workmen Compensation Reserve ₹1,00,000, Creditors ₹2,00,000, Bills Payable ₹60,000, Others ₹3,40,000; Sundry Assets ₹16,30,000, Cash ₹70,000. Sundry assets realised ₹14,00,000, and the liabilities were discharged as follows: (i) Creditors due on 31st May, 2025 were paid at a discount of 3% per annum. (ii) Bills Payable were discharged at a rebate of ₹1,000. (iii) A Workmen Compensation Claim of ₹40,000 was met. (iv) Dissolution expenses of ₹30,000 were paid. Prepare (a) the Realisation Account, (b) Partners’ Capital Accounts.

Solution

REALISATION ACCOUNT

Particulars	₹	Particulars	₹
To Sundry Assets A/c	16,30,000	By Creditors A/c	2,00,000
To Bank A/c:		By Bills Payable A/c	60,000
Creditors 1,99,000		By Others A/c	3,40,000
Bills Payable 59,000		By Bank A/c (Sundry Assets realised)	14,00,000
Others 3,40,000	5,98,000
To Bank A/c (Expenses)	30,000	By Loss transferred to:
		Mike’s Capital A/c 1,54,800
		Ajay’s Capital A/c 1,03,200	2,58,000
Total	22,58,000	Total	22,58,000

PARTNERS’ CAPITAL ACCOUNTS

Particulars	Mike	Ajay	Particulars	Mike	Ajay
To Realisation A/c (Loss)	1,54,800	1,03,200	By Balance b/d	6,00,000	4,00,000
To Bank A/c	4,81,200	3,20,800	By Workmen Compensation Reserve A/c	36,000	24,000
Total	6,36,000	4,24,000	Total	6,36,000	4,24,000

Working Notes: Ratio (by capital) Mike : Ajay = 3 : 2. Creditors’ discount for 2 months @3% p.a. = 2,00,000 × 3/100 × 2/12 = ₹1,000, paid ₹1,99,000. Bills Payable paid ₹59,000 (rebate ₹1,000). Workmen Compensation Reserve surplus (1,00,000 – 40,000 claim) = ₹60,000, distributed 3 : 2 (₹36,000 and ₹24,000).