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Following is the Balance Sheet of M/s. Bhumi, Bhupal and Bipin as on 31st March 2023.Balance Sheet as on 31st March 2023LiabilitiesAmount (₹)AssetsAmount (₹)Capital Accounts:Computer11,000Bhumi15,000Furniture45,000Bhupal11,000Stock53,000Bhumi’s Loan…

Q.3 Following is the Balance Sheet of M/s. Bhumi, Bhupal and Bipin as on 31st March 2023.

Balance Sheet as on 31st March 2023

LiabilitiesAmount (₹)AssetsAmount (₹)
Capital Accounts:Computer11,000
Bhumi15,000Furniture45,000
Bhupal11,000Stock53,000
Bhumi’s Loan A/c25,000Bank7,000
Bills Payable85,000Bipin’s Capital A/c20,000
1,36,0001,36,000

All partners declared as insolvent due to the inability to pay the liabilities, hence the firm is dissolved. Bhupal and Bipin can not pay anything. Bhumi can contribute only ₹ 8,000 from her private estate.

Assets realised – Stock ₹ 35,000, Furniture ₹ 37,000 and computer is sold for ₹ 6,000.

Realisation expenses amounted to ₹ 11,000.

Prepare necessary ledger accounts to close the books of the Firm.

OR

Surekha sold goods to Suman on credit for ₹ 20,000 for which Suman accepted the bill for 3 months. Surekha discounted the bill with her bank at 10% p.a. on the same day.

On the due date, Suman requested Surekha to accept ₹ 8,000, with interest ₹ 1,000 in cash and to draw a new bill for the balance for 2 months. Surekha agrees to this proposal.

Before due date Suman retired her acceptance by paying ₹ 11,800.

Pass necessary Journal Entries in the books of Surekha.

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Answer: Realisation loss ₹ 42,000 (₹ 14,000 each); Bills Payable receive ₹ 82,000 and ₹ 3,000 remains unpaid; Bhumi’s loan and capital claim (₹ 34,000) cannot be paid; the deficiency of Bhupal (₹ 3,000) and Bipin (₹ 34,000), ₹ 37,000 in all, is closed through Deficiency Account.

Working notes

  • No profit sharing ratio is given, so profits and losses are shared equally (Partnership Act, 1932).
  • Assets realised: ₹ 35,000 + ₹ 37,000 + ₹ 6,000 = ₹ 78,000 against book value ₹ 1,09,000. Loss = ₹ 1,09,000 + ₹ 11,000 expenses – ₹ 78,000 = ₹ 42,000, i.e. ₹ 14,000 per partner.
  • Cash available: ₹ 7,000 + ₹ 78,000 – ₹ 11,000 + ₹ 8,000 (Bhumi’s private estate) = ₹ 82,000. Outside creditors rank first, so the whole ₹ 82,000 goes to Bills Payable (₹ 85,000); ₹ 3,000 remains unpaid and nothing is left for Bhumi’s loan.
  • Since all partners are insolvent, Garner v. Murray does not apply (there is no solvent partner). The unpaid claims (Bills Payable ₹ 3,000, Bhumi’s Loan ₹ 25,000 and Bhumi’s capital balance ₹ 9,000 = ₹ 37,000) are transferred to Deficiency Account, which exactly absorbs the deficiencies of Bhupal ₹ 3,000 and Bipin ₹ 34,000.

Realisation Account

Dr. ParticularsAmount (₹)Cr. ParticularsAmount (₹)
To Computer A/c11,000By Bank A/c (assets realised)78,000
To Furniture A/c45,000By Loss transferred to:
Bhumi’s Capital A/c 14,000
Bhupal’s Capital A/c 14,000
Bipin’s Capital A/c 14,000		42,000
To Stock A/c53,000
To Bank A/c (expenses)11,000
1,20,0001,20,000

Partners’ Capital Accounts

Dr. ParticularsBhumi (₹)Bhupal (₹)Bipin (₹)Cr. ParticularsBhumi (₹)Bhupal (₹)Bipin (₹)
To Balance b/d––20,000By Balance b/d15,00011,000–
To Realisation A/c (loss)14,00014,00014,000By Bank A/c (private estate)8,000––
To Deficiency A/c9,000––By Deficiency A/c–3,00034,000
23,00014,00034,00023,00014,00034,000

Bhumi’s Loan Account

Dr. ParticularsAmount (₹)Cr. ParticularsAmount (₹)
To Deficiency A/c25,000By Balance b/d25,000
25,00025,000

Bills Payable Account

Dr. ParticularsAmount (₹)Cr. ParticularsAmount (₹)
To Bank A/c82,000By Balance b/d85,000
To Deficiency A/c3,000
85,00085,000

Bank Account

Dr. ParticularsAmount (₹)Cr. ParticularsAmount (₹)
To Balance b/d7,000By Realisation A/c (expenses)11,000
To Realisation A/c78,000By Bills Payable A/c82,000
To Bhumi’s Capital A/c8,000
93,00093,000

Deficiency Account

Dr. ParticularsAmount (₹)Cr. ParticularsAmount (₹)
To Bhupal’s Capital A/c3,000By Bills Payable A/c3,000
To Bipin’s Capital A/c34,000By Bhumi’s Loan A/c25,000
By Bhumi’s Capital A/c9,000
37,00037,000

OR (Bills of exchange): Journal entries in the books of Surekha

Discount = ₹ 20,000 × 10/100 × 3/12 = ₹ 500. Balance for the new bill = ₹ 20,000 – ₹ 8,000 = ₹ 12,000. Rebate on retirement = ₹ 12,000 – ₹ 11,800 = ₹ 200.

DateParticularsDebit (₹)Credit (₹)
—Suman’s A/c ............ Dr.
To Sales A/c
(Being goods sold on credit to Suman)		20,000
20,000
—Bills Receivable A/c ............ Dr.
To Suman’s A/c
(Being Suman’s acceptance received for 3 months)		20,000
20,000
—Bank A/c ............ Dr.
Discount A/c ............ Dr.
To Bills Receivable A/c
(Being the bill discounted with bank at 10% p.a. for 3 months)		19,500
500

20,000
Due dateSuman’s A/c ............ Dr.
To Bank A/c
(Being the discounted bill met by Surekha at the bank on Suman’s request for renewal)		20,000
20,000
Due dateSuman’s A/c ............ Dr.
To Interest A/c
(Being interest charged to Suman)		1,000
1,000
Due dateCash A/c ............ Dr.
To Suman’s A/c
(Being ₹ 8,000 and interest ₹ 1,000 received in cash from Suman)		9,000
9,000
Due dateBills Receivable A/c ............ Dr.
To Suman’s A/c
(Being new bill for 2 months received for the balance)		12,000
12,000
Before due dateCash A/c ............ Dr.
Rebate A/c ............ Dr.
To Bills Receivable A/c
(Being Suman’s acceptance retired before the due date under rebate)		11,800
200

12,000
Doubtly AI · 28 Oct 2026 AI-verified · Oct 2026 Report
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