Basics

These Liabilities Must Be paid with their Book value if Question is silent
about their Payment

A) Creditors/ sundry creditors

B) Bills Payable
C) Employees provident Fund
D)Bank Overdraft
E) Advance income
F) Outstanding expenses
G) Bank loan/ wife loan

Investment Fluctuation Fund, Provision for Bad and doubtful debts &
provision for depreciation are only Transfer credit of Realisation Account.
Tangible Assets Must Be Realised with their Book value if Question is silent
about their Sale

Ignore Realisation of Intangible Assets

Partner’s Self Loan Account (Loan given by Partner to Firm)
Case 1 Liabilities Amount Assets Amount
A’s loan 50,000

Additional information – No information

Case 2 Liabilities Amount Assets Amount
A’s loan 50,000

Additional information – A agree to take cash 45,000 in full

settlement of his loan
Case 3 Liabilities Amount Assets Amount
A’s loan 50,000
Additional information – A agree to take cash 55,000 in full
settlement of his loan
Case 4 Liabilities Amount Assets Amount
A’s loan 50,000

Additional information – A agree to take furniture of 40,000 in full

settlement of his loan.
Case 5 Liabilities Amount Assets Amount
A’s loan 50,000

Additional information – A agree to take Machinery of 60,000 in full

settlement of his loan.
Case 6 Liabilities Amount Assets Amount
A’s loan 50,000

Additional information – A agree to take Stock of ₹20,000 and

Balance in cash
Q.1) Pardeep and Rajesh were partners in a firm sharing profits and losses in the ratio of 3:2.
They decided to dissolve their partnership firm on 31-3-2021. Pardeep was deputed to
realize the assets and to pay off the liabilities. He was paid 1000 as commission for his
services. The financial position of the firm on 31-3-2021 was as follows:

Liabilities Amount Assets Amount

Creditors 80,000 Building 1,20,000
Mrs. Pradeep’s loan 40,000 Investment 30,600
Rajesh loan 24,000 Debtors 34,000
Investment fluctuation reserve 8,000 Less PFDD 4,000 30,000
Capital of Pradeep 42,000 Bills receivables 37,400
Capital of Rajesh 42,000 Bank 6,000
Profit and loss 8,000
Goodwill 4,000
2,36,000 2,36,000
Following terms and conditions were agreed upon:
a) Pardeep agreed to pay off his wife’s loan
b) Half of the debtors realized 12,000 and remaining debtors were used to pay off 25% of
the creditors
c) Investment sold to Rajesh for 27,000
d) Building realized 1,52,000
e) Remaining creditors were to be paid after two months they were paid immediately at
10%p.a. discount
f) Bill receivables were settled at a loss of 1,400
g) Realization expenses amounted to 2,500
Prepare realisation account.
Q.2) Michael, Jackson and John were partners in a firm sharing profits in the ratio of
3:1:1. On 31st march,2017 they decided to dissolve their firm. On that date their balance
sheet was as follows:
Liabilities Amount ₹ Assets Amount ₹
Creditors 11,500 Bank 6,000
Loan 3,500 Debtors 48,400
Less PFDD 2,400 46,000
Capital Stock in trade 16,000
Michael 50,000
Jackson 25,000
John 14,000 89,000
Furniture 2,000
Sundry assets 34,000
1,04,000 1,04,000
It was agreed that:
i) Michael was to take over the furniture at ₹2,600 and Debtors amounting to ₹40,000 at
34,400 and the creditors of ₹10,000 were to be paid by him at this figure.
ii) Jackson was to take over all the stock in trade at 14,000 and some of the other sundry
assets at
₹28,800 (being 10% less than book value)
iii) John was to take over the remaining sundry assets at 90% of the book value and
assumed the responsibility for the discharge of the loan.
iv) The remaining debtors were sold to a debt collecting agency for 50% of the book value.
The expenses of dissolution 600 were paid by John.
Prepare Realisation account.
BASICS OF JOURNAL ENTRIES
TREATMENT OF REALISATION EXPENSES
Q.3) What Journal entries will be passed in the books of A and B sharing profits and losses in
the ratio of 3 : 1, for the following transactions on dissolution of the firm?
(i) An unrecorded asset Realised ` 25,000.
(ii) Stock of ` 20,000 was taken by partner A.
(iii) Creditors were paid ` 30,000.
(iv) There was a balance of ` 10,000 in the General Reserve Account on the date of
dissolution.
(v) There was a vehicle loan of ₹ 2,00,000 which was paid by surrender of asset to the
bank at an agreed value of ₹ 1,40,000 and the shortfall was met from firm’s bank
account.
(vI) Gain (Profit) on Realisation of ` 40,000 is to be distributed between partners A and
B.
Q.4) Ravi, Shankar and Madhur were partners in a firm sharing profits in the ratio of 7:2:1.
On 31st march,2018 firm was dissolved, and after transferring sundry assets (other than
cash in hand and cash at bank) and third party liabilities in the realisation account the
following transaction took place:
i) Debtors amounting to ₹1,40,000 were handed over to a debt collection agency which
charged 5% commission. The remaining debtors were ₹47,000 out of which debtors of
₹17,000 could not be recovered because the same became insolvent.

ii) Creditors amounting to ₹5,000 were paid ₹3,500 in full settlement of their claim and
balance creditors were handed over stock of ₹90,000 in full settlement of their claim of
₹95,000.

iii) A bills receivables ₹2,000 discounted with the bank was dishonoured by its acceptor
and the same had to be met by the firm.

iv) Profit on realisation amounted to ₹6,000.

v) Ravi’s Loan of ₹ 80,000 to the firm and he took over Machinery of ₹ 60,000 as part
payment
Pass the necessary journal entries for the above transaction in the books of Ravi, Shankar
and Madhur.
Q.5) What journal entries will be passed for the following transaction on the dissolution of a
firm of partner A and B
i) Old furniture which had been written off in the books was sold for 20,000
ii) Z an old customer whose account for 10,000 was written off as bad debt in the previous
year paid 7500 in full settlement.
iii) A agreed to takeover firm goodwill (not record in the book of a firm) 50,000
iv) There was an old computer which had been written off from the books. It was estimated
to realise 5,000. it is taken by B a partner at the estimated price less 30%
v) Investment costing 20,000 (being 1,000 shares) had been written off from the books.
These investments (shares) are valued @ 15 each and distributed between the partners
in their profit sharing ratio
vi) WCR appear in Books 6000. and In Additional point claim on WCR is 2000.
 Thank you
DOWNLOAD SPCC APP FOR MOST EXPECTED PREMIUM MOCK TEST