Question

Pradeep 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^st March, 2018. Pradeep was deputed to realize the assets and to pay off the liabilities. He was paid Rs. 1,000 as commission for his services. The financial position of the firm on 31^st March, 2018 was as follows: 

                   Balance Sheet As at March 31, 2018 

Following terms and conditions were agreed upon: 

i. Pradeep agreed to pay off his wife’s loan. 

ii. Half of the debtor’s realized Rs. 12,000 and remaining debtors were used to pay off 25% of the creditors. 

iii. Investment sold to Rajesh for Rs. 27,000 

iv. Building realized Rs. 1,52,000 

v. Remaining creditors were to be paid after two months, they were paid immediately at 10% p.a. discount 

vi. Bill receivables were settled at a loss of Rs. 1,400 

vii. Realization expenses amounted to Rs. 2,500 Prepare Realization Account.

Answer 1

Realisation A/c

Dr.				Cr.
Particulars			Amount (₹)	Particulars		Amount (₹)
To Building			1,20,000	By Provision for Doubtful Debts		4,000
To Investments			30,600	By Creditors		80,000
To Debtors			34,000	By Mrs. Pradeep’s Loan		40,000
To Bills Receivable			37,400	By Investment Fluctuation Fund		8,000
To Goodwill			4,000
To Pradeep’s Capital A/c (Wife loan paid)			40,000	By Bank A/c:
To Cash A/c (Creditors Paid) (WN1)			59,000	Debtors	12,000
To Pradeep’s Capital A/c (Commission)			1,000	Building	1,52,000
To Cash A/c (Realisation Expenses)			2,500	Bills Receivable	36,000	2,00,000
To Profit transferred to:
Pradeep’s Capital A/c		18,300		By Cash A/c (Sale of Investments)		27,000
Rajesh’s Capital A/c		12,200	30,500
			3,59,000			3,59,000

Working Notes:

Remaining Creditors to be paid	= ₹ (80,000 × 75/100) = ₹ 60,000
Discount Received on Creditors	= ₹ (60,000 × 10/100 × 2/12) = ₹ 1,000
Amount paid to the Creditors	= ₹ (60,000 – 1,000) = ₹ 59,000

Answer 2

Working Notes:

(i) Payment to creditors = (Rs.80,000 - 20,000) - {Rs.60,000 x (10/100) x (2/12)}

= Rs.60,000 -Rs 1,000

= Rs. 59,000

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