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Sharmila, Urmila and Leela are partners in the firm ‘Jeevan Stores’ sharing profit and losses in the ratio of 2 : 2 : 1 respectively. On 31st March 2020, they decided to dissolve the firm when their Balance Sheet was as under.Balance Sheet as on 31st…

Q.3 Sharmila, Urmila and Leela are partners in the firm ‘Jeevan Stores’ sharing profit and losses in the ratio of 2 : 2 : 1 respectively. On 31st March 2020, they decided to dissolve the firm when their Balance Sheet was as under.

Balance Sheet as on 31st March 2020

LiabilitiesAmount (₹)AssetsAmount (₹)
Capital Account:Goodwill45,600
Sharmila2,27,160Machinery73,000
Urmila1,44,000Motor car1,67,600
Leela1,08,000Building1,02,000
Creditors28,800Investment62,400
Bills Payable21,600Debtors30,600
Stock45,000
Bank3,360
5,29,5605,29,560

The firm was dissolved on the above date and the assets were realised as under:

  1. Sharmila agreed to take over the building at ₹ 1,23,600.
  2. Urmila took over goodwill, stock and debtors at book values and agreed to pay creditors and bills payable.
  3. Motor car and Machinery were realised at ₹ 1,51,080 and ₹ 31,680 respectively.
  4. Investments were taken by Leela at an agreed value of ₹ 55,440.
  5. Realisation expenses amounted to ₹ 6,800.

Prepare: (a) Realisation Account (b) Partners’ Capital Account (c) Bank Account

OR

Kanika owes ₹ 26,000 to Mansi. Mansi drew a bill for ₹ 21,000 on Kanika for 3 months’ period and received the balance of ₹ 5,000 by a crossed cheque. The bill was duly accepted and returned to Mansi.

On the same day, Mansi endorsed Kanika’s acceptance to Bansari. On the due date, Bansari informed Mansi that Kanika dishonoured her acceptance and noting charges ₹ 280 were paid.

Mansi then drew a new bill for one month on Kanika including noting charges and interest ₹ 650. On the due date, Kanika honoured her acceptance by cheque.

Prepare: (a) Journal entries in the books of ‘Mansi’ (b) ‘Mansi’ account in the books of ‘Kanika’

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Answer: Realisation loss ₹ 50,000 (Sharmila ₹ 20,000, Urmila ₹ 20,000, Leela ₹ 10,000); final payments Sharmila ₹ 83,560, Urmila ₹ 53,200, Leela ₹ 42,560. OR: new bill ₹ 21,930; Mansi’s account in Kanika’s books is closed with nil balance.

Working notes

  • Urmila takes over goodwill ₹ 45,600 + stock ₹ 45,000 + debtors ₹ 30,600 = ₹ 1,21,200 (debited to her capital).
  • Urmila pays creditors ₹ 28,800 + bills payable ₹ 21,600 = ₹ 50,400 (credited to her capital).
  • Cash realised: Motor car ₹ 1,51,080 + Machinery ₹ 31,680 = ₹ 1,82,760.

(a) Realisation Account

Dr. ParticularsAmount (₹)Cr. ParticularsAmount (₹)
To Goodwill A/c45,600By Creditors A/c28,800
To Machinery A/c73,000By Bills Payable A/c21,600
To Motor car A/c1,67,600By Sharmila’s Capital A/c (building)1,23,600
To Building A/c1,02,000By Urmila’s Capital A/c (goodwill, stock, debtors)1,21,200
To Investment A/c62,400By Leela’s Capital A/c (investment)55,440
To Debtors A/c30,600By Bank A/c (motor car 1,51,080 + machinery 31,680)1,82,760
To Stock A/c45,000By Loss transferred to:
Sharmila’s Capital A/c 20,000
Urmila’s Capital A/c 20,000
Leela’s Capital A/c 10,000		50,000
To Urmila’s Capital A/c (creditors and bills payable paid)50,400
To Bank A/c (realisation expenses)6,800
5,83,4005,83,400

(b) Partners’ Capital Account

Dr. ParticularsSharmila (₹)Urmila (₹)Leela (₹)Cr. ParticularsSharmila (₹)Urmila (₹)Leela (₹)
To Realisation A/c (assets taken over)1,23,6001,21,20055,440By Balance b/d2,27,1601,44,0001,08,000
To Realisation A/c (loss)20,00020,00010,000By Realisation A/c (liabilities paid)–50,400–
To Bank A/c (final payment)83,56053,20042,560
2,27,1601,94,4001,08,0002,27,1601,94,4001,08,000

(c) Bank Account

Dr. ParticularsAmount (₹)Cr. ParticularsAmount (₹)
To Balance b/d3,360By Realisation A/c (expenses)6,800
To Realisation A/c1,82,760By Sharmila’s Capital A/c83,560
By Urmila’s Capital A/c53,200
By Leela’s Capital A/c42,560
1,86,1201,86,120

OR (Bills of exchange)

(a) Journal entries in the books of Mansi

ParticularsDebit (₹)Credit (₹)
(1) Bills Receivable A/c ............ Dr.
To Kanika’s A/c
(Being Kanika’s acceptance received for 3 months)		21,000
21,000
(2) Bank A/c ............ Dr.
To Kanika’s A/c
(Being balance received by crossed cheque)		5,000
5,000
(3) Bansari’s A/c ............ Dr.
To Bills Receivable A/c
(Being Kanika’s acceptance endorsed to Bansari)		21,000
21,000
(4) Kanika’s A/c ............ Dr.
To Bansari’s A/c
(Being Kanika’s acceptance dishonoured and noting charges ₹ 280 paid by Bansari)		21,280
21,280
(5) Kanika’s A/c ............ Dr.
To Interest A/c
(Being interest charged to Kanika)		650
650
(6) Bills Receivable A/c ............ Dr.
To Kanika’s A/c
(Being new bill for one month received for ₹ 21,000 + ₹ 280 + ₹ 650)		21,930
21,930
(7) Bank A/c ............ Dr.
To Bills Receivable A/c
(Being new bill honoured by cheque on due date)		21,930
21,930

(b) Mansi’s Account in the books of Kanika

Dr. ParticularsAmount (₹)Cr. ParticularsAmount (₹)
To Bills Payable A/c21,000By Balance b/d26,000
To Bank A/c5,000By Bills Payable A/c (dishonour)21,000
To Bills Payable A/c (new bill)21,930By Noting Charges A/c280
By Interest A/c650
47,93047,930

Mansi’s account is fully settled, so it has no closing balance.

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