Question

Guru, Samta and Prakash were partners in a firm sharing profits and losses in the ratio of 2 : 3 : 5. On 31st March, 2024, their Balance Sheet was as follows: \begin{center} Balance Sheet of Guru, Samta and Prakash as at 31\textsuperscript{st March, 2024} \end{center} \begin{tabular}{|p{4cm}|r|p{7cm}|r|} \hline Liabilities & Amount (₹) & Assets & Amount (₹)
\hline Creditors & 4,20,000 & Cash at Bank & 3,10,000
Mrs. Guru’s Loan & 5,00,000 & Stock & 6,00,000
Samta’s Loan & 4,40,000 & Debtors & 3,90,000
& & Less: Provision for doubtful debts & (10,000)
& & & 3,80,000
Capitals: & & Land and Building & 4,14,000
Guru & 3,00,000 & Plant and Machinery & 9,00,000
Samta & 5,00,000 & &
Prakash & 4,44,000 & &
\cline{2-2} Total & 26,04,000 & Total & 26,04,000
\hline \end{tabular} On the above date the firm was dissolved and the following transactions took place :
(i) Debtors were taken over by creditors in full settlement of their account.
(ii) 50% of stock was taken over by Samta at 10% less than book value. Remaining stock sold at 20% profit.
(iii) Land and Building taken over by Prakash for ₹ 20,00,000.
Plant and Machinery sold as scrap for ₹ 1,00,000.
(iv) Guru agreed to pay off Mrs. Guru’s loan.
(v) Realisation expenses amounted to ₹ 56,000.
Prepare the Realisation Account.

Hint:

In a dissolution, assets taken over are recorded on the credit side of the Realisation A/c at agreed values. Liabilities settled via asset takeovers do not require cash transactions.

Answer 1

Realisation Account

 

Particulars	Amount (₹)	Particulars	Amount (₹)
To Stock	6,00,000	By Samta’s Capital A/c (50% stock at 10% less)	2,70,000
To Debtors	3,90,000	By Bank A/c (Remaining stock at 20% profit)	3,60,000
To Land and Building	4,14,000	By Creditors A/c (settled via debtors)	4,20,000
To Plant and Machinery	9,00,000	By Prakash’s Capital A/c (L&B taken over)	20,00,000
To Bank A/c (Realisation Exp.)	56,000	By Bank A/c (Plant sold)	1,00,000
Total	23,60,000	Total	31,50,000

Balancing figure: Profit on Realisation = ₹ 7,90,000 distributed in 2 : 3 : 5
Guru’s Share = $ \dfrac{2}{10} \times 7,90,000 = ₹ 1,58,000 $
Samta’s Share = $ \dfrac{3}{10} \times 7,90,000 = ₹ 2,37,000 $
Prakash’s Share = $ \dfrac{5}{10} \times 7,90,000 = ₹ 3,95,000 $

Final Realisation Entries:
To Partners’ Capital A/cs (Profit):
 Guru – ₹ 1,58,000
 Samta – ₹ 2,37,000
 Prakash – ₹ 3,95,000