Loading Tutorstips...
✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
Michael, 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 decided to dissolve the partnership. Their Balance Sheet showed Creditors ₹40,000, Michael’s Loan ₹10,000, Workmen Compensation Reserve ₹21,000, Capitals – Michael ₹60,000, Jackson ₹40,000, John ₹10,000; Cash at Bank ₹3,000, Stock ₹50,000, Sundry Debtors ₹50,000, Land and Building ₹57,000, Profit and Loss A/c (Dr.) ₹15,000, Advertisement Suspense A/c (Dr.) ₹6,000. During realisation, a liability under a suit for damages was settled at ₹20,000, as against only ₹5,000 provided for in the books. Land and Building were sold for ₹40,000, and Stock and Sundry Debtors realised ₹30,000 and ₹42,000 respectively. Expenses of realisation amounted to ₹1,200. There was a car in the firm, completely written off from the books, which was taken over by Michael for ₹20,000; he also agreed to pay an Outstanding Salary of ₹20,000 not provided for in the books. Prepare the Realisation Account, Partners’ Capital Accounts and Bank Account.
REALISATION ACCOUNT
| Particulars | ₹ | Particulars | ₹ |
|---|---|---|---|
| To Land and Building A/c | 57,000 | By Creditors A/c | 40,000 |
| To Stock A/c | 50,000 | By Bank A/c: | |
| To Sundry Debtors A/c | 50,000 | Land and Building 40,000 | |
| To Bank A/c: | Stock 30,000 | ||
| Creditors (40,000 + 15,000, incl. damages claim top-up) 55,000 | Sundry Debtors 42,000 | 1,12,000 | |
| Expenses 1,200 | 56,200 | ||
| By Loss transferred to: | |||
| Michael’s Capital A/c 30,600 | |||
| Jackson’s Capital A/c 20,400 | |||
| John’s Capital A/c 10,200 | 61,200 | ||
| Total | 2,13,200 | Total | 2,13,200 |
PARTNERS’ CAPITAL ACCOUNTS
| Particulars | Michael | Jackson | John | Particulars | Michael | Jackson | John |
|---|---|---|---|---|---|---|---|
| To Profit and Loss A/c | 7,500 | 5,000 | 2,500 | By Balance b/d | 60,000 | 40,000 | 10,000 |
| To Advertisement Suspense A/c | 3,000 | 2,000 | 1,000 | By Workmen Compensation Reserve A/c | 10,500 | 7,000 | 3,500 |
| To Realisation A/c (Loss) | 30,600 | 20,400 | 10,200 | By Bank A/c | – | – | 200 |
| To Bank A/c | 29,400 | 19,600 | – | ||||
| Total | 70,500 | 47,000 | 13,700 | Total | 70,500 | 47,000 | 13,700 |
MICHAEL’S LOAN ACCOUNT
| Particulars | ₹ | Particulars | ₹ |
|---|---|---|---|
| To Bank A/c | 10,000 | By Balance b/d | 10,000 |
BANK ACCOUNT
| Particulars | ₹ | Particulars | ₹ |
|---|---|---|---|
| To Balance b/d | 3,000 | By Michael’s Loan A/c | 10,000 |
| To Realisation A/c | 1,12,000 | By Realisation A/c | 56,200 |
| To John’s Capital A/c | 200 | By Michael’s Capital A/c | 29,400 |
| By Jackson’s Capital A/c | 19,600 | ||
| Total | 1,15,200 | Total | 1,15,200 |
Note: Michael taking over the unrecorded car at ₹20,000 and his taking over the unrecorded Outstanding Salary liability of ₹20,000 are equal and offsetting, so neither needs a separate entry in the Realisation Account or his Capital Account.
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "T.S. Grewal Class 12 Chapter 7 Q.32 - Dissolution of a Partnership Firm", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 7 - Dissolution of a Partnership Firm.
It is primarily curated for Class 11 and Class 12 high school commerce, accounting, and economics students, as well as aspirants preparing for board exams or CA Foundation.
You can take our custom-built interactive practice quiz directly on this page to test your understanding of "T.S. Grewal Class 12 Chapter 7 Q.32 - Dissolution of a Partnership Firm" instantly.