A, B and C are partners sharing profits and losses in the ratio of 2:2:1 respectively. The Balance Sheet of the firm as at 31st March, 2025 is as…
CA Foundation · Accounting · RTP · January 2026
A, B and C are partners sharing profits and losses in the ratio of 2:2:1 respectively. The Balance Sheet of the firm as at 31st March, 2025 is as follows: Liabilities ₹ Assets ₹ Capital Accounts: Fixed Assets 2,00,000 A 1,46,000 Current Assets: B 54,000 Stock 1,25,000 C 50,000 Debtors 1,25,000 2,50,000 C’s Loan Account 25,000 Cash 5,000 Mrs. A’s Loan A/c 50,000 Advance to B 20,000 Sundry Creditors 1,25,000 Provision for Bad Debts 25,000 4,75,000 4,75,000 The firm was dissolved on 31st March, 2025. After preparing the Balance Sheet as on 31st March, 2025; it was discovered that purchases amounting to 20,000 in March, 2025 were not recorded in the books, though the goods were received during March, 2025. Fixed Assets realised - 1,00,000, Stock - 1,05,000 and Debtors - 1,02,500. Creditors were paid after deduction of discount @2%, The realisation expenses amounted - 5,400. A agreed to take over the loan of Mrs. A. B is insolvent and his estate is unable to contribute anything. Prepare Realisation A/c, Partners Capital A/c and Cash A/c applying the principles of Garner v. Murray.
Suggested Answer and Working Notes:
Rectification Entry: Particulars Dr. ₹ Cr. ₹ A's Capital A/c Dr. 8,000 B's Capital A/c Dr. 8,000 C's Capital A/c Dr. 4,000 To Sundry Creditors A/c 20,000 (Being the omission to record purchases, now rectified) Realisation Account Particulars ₹ Particulars ₹ To Fixed Assets 2,00,000 By Sundry Creditors A/c (₹ 1,25,000 +20,000) 1,45,000 To Stock 1,25,000 To Debtors 1,25,000 By Mrs. A's Loan A/c 50,000 To Cash A/c (S. Creditors) [(₹ 1,25,000 +20,000) ×₹ 98/100] 1,42,100 By Provision for Bad Debts A/c 25,000 To Cash A/c (R. Expenses) 5,400 By Cash A/c: Fixed Assets 1,00,000 Stock 1,05,000 Debtors 1,02,500 3,07,500 To A's Capital A/c (Mrs. A's Loan) 50,000 By Capital Accounts: (Loss on Realisation) A 48,000 B 48,000 C 24,000 1,20,000 6,47,500 6,47,500 Cash Account Particulars ₹ Particulars ₹ To Balance b/d 5,000 By Realisation A/c 1,42,100 To Realisation A/c 3,07,500 By Realisation A/c 5,400 To A's Capital A/c (Cash brought in by A) 48,000 By C's Capital A/c 25,000 To C's Capital A/c (Cash brought in by C) 24,000 By A's Capital A/c 1,71,500 By C's Capital A/c 40,500 3,84,500 3,84,500 Partners’ Capital Account Particulars A (₹) B (₹) C (₹) Particulars A (₹) B (₹) C (₹) To Sundry Creditors 8,000 8,000 4,000 By Balance b/d 1,46,000 54,000 50,000 To Balance c/d 1,38,000 46,000 46,000 1,46,000 54,000 50,000 1,46,000 54,000 50,000 To Advance to B A/c - 20,000 - By Realisation A/c (Mrs. A's Loan) 50,000 - - To Realisation Loss A/c 48,000 48,000 24,000 By Balance b/d 1,38,000 46,000 46,000 To B's Capital A/c 16,500 - 5,500 By Cash A/c 48,000 - 24,000 To Cash A/c (Final Payment) 1,71,500 - 40,500 By A's Capital A/c (WN) - 16,500 - By C's Capital A/c (WN) - 5,500 - 2,36,000 68,000 70,000 2,36,000 68,000 70,000 Working Note (WN): Since B is insolvent, his deficiencies is to be borne by A & C in capital sharing ratio (after rectification) i.e. A’s Share = 22,000 x 1,38,000 /1,84,000 = 16,500 C’s Share = 22,000 x 46,000 /1,84,000 = 5,500
Topics: Dissolution of Partnership Firms and LLPs
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