Answer: Realisation loss ₹ 2,00,000 (Virat ₹ 80,000, Rohit ₹ 80,000, Hardik ₹ 40,000); creditors are paid ₹ 1,80,000 and the unpaid ₹ 60,000 equals the total deficiency of the partners (₹ 24,000 + ₹ 32,000 + ₹ 4,000), closed through the Deficiency Account. (OR: new bill ₹ 30,600.)
Working notes
- Assets transferred to Realisation: 1,56,000 + 90,000 + 70,000 + 40,000 = ₹ 3,56,000. Realised: 80,000 + 60,000 + 20,000 = ₹ 1,60,000 (goodwill realises nothing).
- Realisation loss = 3,56,000 + 4,000 – 1,60,000 = ₹ 2,00,000, shared 2 : 2 : 1.
- Cash available for creditors = 16,000 + 1,60,000 – 4,000 + 4,000 + 4,000 = ₹ 1,80,000. Creditors ₹ 2,40,000 can be paid only ₹ 1,80,000.
- All partners are insolvent, so the rule in Garner v. Murray does not apply. The deficiencies of the partners and the unpaid creditors (₹ 60,000) are closed by transfer to a Deficiency Account.
Realisation Account
| Dr. Particulars | Amount (₹) | Cr. Particulars | Amount (₹) |
|---|
| To Building A/c | 1,56,000 | By Bank A/c (assets realised):
Building 80,000
Furniture 60,000
Debtors 20,000 | 1,60,000 |
| To Furniture A/c | 90,000 | By Loss on realisation transferred to:
Virat’s Capital A/c 80,000
Rohit’s Capital A/c 80,000
Hardik’s Capital A/c 40,000 | 2,00,000 |
| To Goodwill A/c | 70,000 | | |
| To Debtors A/c | 40,000 | | |
| To Bank A/c (realisation expenses) | 4,000 | | |
| 3,60,000 | | 3,60,000 |
Partners’ Capital Accounts
| Dr. Particulars | Virat (₹) | Rohit (₹) | Hardik (₹) | Cr. Particulars | Virat (₹) | Rohit (₹) | Hardik (₹) |
|---|
| To Realisation A/c (loss) | 80,000 | 80,000 | 40,000 | By Balance b/d | 52,000 | 44,000 | 36,000 |
| | | | By Bank A/c (amount recovered) | 4,000 | 4,000 | – |
| | | | By Deficiency A/c | 24,000 | 32,000 | 4,000 |
| 80,000 | 80,000 | 40,000 | | 80,000 | 80,000 | 40,000 |
Creditors Account
| Dr. Particulars | Amount (₹) | Cr. Particulars | Amount (₹) |
|---|
| To Bank A/c | 1,80,000 | By Balance b/d | 2,40,000 |
| To Deficiency A/c (unpaid) | 60,000 | | |
| 2,40,000 | | 2,40,000 |
Deficiency Account
| Dr. Particulars | Amount (₹) | Cr. Particulars | Amount (₹) |
|---|
| To Virat’s Capital A/c | 24,000 | By Creditors A/c | 60,000 |
| To Rohit’s Capital A/c | 32,000 | | |
| To Hardik’s Capital A/c | 4,000 | | |
| 60,000 | | 60,000 |
Bank Account
| Dr. Particulars | Amount (₹) | Cr. Particulars | Amount (₹) |
|---|
| To Balance b/d | 16,000 | By Realisation A/c (expenses) | 4,000 |
| To Realisation A/c (assets realised) | 1,60,000 | By Creditors A/c | 1,80,000 |
| To Virat’s Capital A/c | 4,000 | | |
| To Rohit’s Capital A/c | 4,000 | | |
| 1,84,000 | | 1,84,000 |
OR: Journal entries in the books of Disha
Due date of the first bill: 1st April + 3 months = 1st July + 3 days of grace = 4th July, 2022 (renewed on 30th June, before maturity). New bill = (50,000 – 20,000) + 600 = ₹ 30,600 for 2 months from 30th June: 30th August + 3 days = 2nd September, 2022.
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|
| 1-4-2022 | Priya A/c Dr.
To Sales A/c
(Goods sold on credit) | | 50,000 |
50,000 |
| 1-4-2022 | Bills Receivable A/c Dr.
To Priya A/c
(Bill for 3 months accepted by Priya) | | 50,000 |
50,000 |
| 30-6-2022 | Priya A/c Dr.
To Bills Receivable A/c
(Old bill cancelled on renewal) | | 50,000 |
50,000 |
| 30-6-2022 | Priya A/c Dr.
To Interest A/c
(Interest charged for renewal) | | 600 |
600 |
| 30-6-2022 | Cash A/c Dr.
To Priya A/c
(Cash received in part payment) | | 20,000 |
20,000 |
| 30-6-2022 | Bills Receivable A/c Dr.
To Priya A/c
(New bill for 2 months for balance plus interest accepted) | | 30,600 |
30,600 |
| 2-9-2022 | Cash A/c Dr.
To Bills Receivable A/c
(New bill honoured on due date) | | 30,600 |
30,600 |
Priya’s Account in the books of Disha
| Date | Dr. Particulars | Amount (₹) | Date | Cr. Particulars | Amount (₹) |
|---|
| 1-4-2022 | To Sales A/c | 50,000 | 1-4-2022 | By Bills Receivable A/c | 50,000 |
| 30-6-2022 | To Bills Receivable A/c (cancelled) | 50,000 | 30-6-2022 | By Cash A/c | 20,000 |
| 30-6-2022 | To Interest A/c | 600 | 30-6-2022 | By Bills Receivable A/c (new bill) | 30,600 |
| | 1,00,600 | | | 1,00,600 |
