CLASS: XII ACCOUNTANCY: DISSOLUTION OF A PARTNERSHIP FIRM GRACE GEORGE

DISSOLUTION OF A PARTNERSHIP FIRM

1. E and F were partners. They decided to dissolve their firm on 31st March 2018. No goodwill appeared in the
books. Show the journal entries in the following alternative cases.
a. If Goodwill realised Rs. 45,000.
b. Goodwill was taken over by E at an agreed value of Rs. 54,000.
2. The amount of sundry assets transferred to realisation account was Rs. 80,000. 60% of them have been sold
at a profit of Rs.2,000. 20% of the remaining were sold at a discount of 30% and remaining were taken over by
Z (a partner) at book value. Journalise.
3. Pass journal entries for the following transactions.
a. Realisation expenses amounted to Rs. 40,000.
b. Realisation expenses amounted to Rs. 20,000 were paid by a partner.
c. Realisation expenses amounted to Rs. 20,000 were paid by the firm on behalf of a partner.
d. A partner was paid remuneration (including expenses) of Rs. 30,000 to carry out dissolution of the
firm. Actual expenses were Rs. 40,000.
e. Dissolution expenses were Rs.32,000. Out of the said expenses Rs.12,000 were to be borne by the firm
and the balance by a partner Rs. 32,000 are paid by the firm.
f. Dissolution expenses were Rs.32,000, Rs.12,000 were to be borne by the firm and the balance by a
partner. The expenses were paid by a partner.
g. Realisation expenses of Rs.20,000 were to the borne and paid by partner.
h. Rohit, a partner is paid remuneration of Rs.20,000 for dissolution of the firm. Realisation expenses of
Rs.32,000 are met by the firm.
i. Rohit, a partner agreed to take over the responsibility of completing dissolution at an agreed
remuneration of Rs. 4,000 and to bear all realisation expenses. Actual realisation expenses amounted
to Rs. 3,200 were paid by Rohit out of its private funds.
j. Rohit one of the partner was to receive 2% of the value of assets realised as remuneration for
completing the dissolution work and was to bear realisation expenses. Realisation expenses were Rs.
4,000 paid by Rohit. The assets (including cash at bank Rs.12,000) realised Rs.6,12,000.
k. Rohit one of the partner was to receive 2% of the net cash realised from dissolution and was to bear
realisation expenses. Realisation expenses were Rs. 4,000. The assets (including cash at bank
Rs.12,000) realised Rs.6,12,000 and cash paid for outsiders’ liabilities amounted to Rs. 1,60,000.
l. Realisation expenses of Rs. 2,000 were to be Borne by Raju a partner. However, it was paid by Sanju.
4. What journal entries would be passed for the following transactions on the dissolution of a firm, after
various assets (other than cash) and third party liabilities have been transferred to realisation account?
a. Compensation to employees paid by the firm amounted to Rs.2,000.
b. There was an unrecorded asset of Rs. 200 which was taken over by Karthik, a partner at Rs. 150.
c. Jatin, a partner, undertook to pay Mrs. Jatin's loan of Rs. 10,000 and took over 50% of the stock at a
discount of 20%. ( book value of stock Rs. 25,000)
d. Balance of the stock was sold at a loss of 10%.
5. Pass the necessary journal entries for the following transactions On The dissolution of firm of X Y and Z( who
were sharing profits in the ratio of 2:2:1) after the transfer of all assets (other than cash) and external liabilities
to realisation account.
a. Debtors were of Rs. 1,24,200. X takes over debtors amounted to Rs.1,20,000 at Rs.1,17,200 and the
remaining debtors were sold to a debt collecting agency at 50% of the value.
b. Sundry assets were of Rs. 1,17,000. Y is to take over some sundry assets at Rs. 72,000 (being 10% less
than the book value). Z is to take over remaining sundry assets at 80% of the book value.
c. Z assumes the responsibility of discharge of Mrs. Z's loan of Rs.11,500 together with accrued interest of
Rs.2,300.

1|Page
CLASS: XII ACCOUNTANCY: DISSOLUTION OF A PARTNERSHIP FIRM GRACE GEORGE

6. Pass the necessary journal entries for the following transactions on the dissolution of the firm of Sudha and
Shiva after the various assets (other than cash) and outside liabilities have been transferred to realisation
account.
a. Sudha agreed to pay off her husband’s loan Rs.19,000.
b. A debtor whose debt of Rs.9,000 was written-off in the books, paid Rs.7,500 in full settlement.
c. Shiva took over all investments at Rs.13,300.
d. Sundry creditors Rs.10,000 were paid at 9% discount.
e. Realisation expenses Rs.3,400 were paid by Sudha for which she was allowed Rs.3,000.
f. Loss on realisation Rs.9,400 was divided between Sudha and Shiva in 3:2 ratio.
7. Disha, Mohit and Nandan are partners. They decided to dissolve the firm. Pass the necessary journal entries
for the following after the various assets (other than cash and bank) and outside liabilities have been
transferred to realisation account.
a. An old typewriter which was not recorded in the books was sold for Rs.2,000 while its expected
value was Rs.5,000.
b. Stock of Rs.70,000 was taken over by Disha at a discount of 30%.
c. Total creditors of the firm were Rs.20,000, creditors fir Rs.2,000 were untraceable and other
creditors accepted payment, allowing 10% discount.
d. Mohit paid realisation expenses of Rs.18,000 out of his private funds, who was to get remuneration
of Rs.13,000 for completing the dissolution process and was responsible to bear all the realisation
expenses.
e. Nandan had taken a loan of Rs. 50,000 from the firm which was paid fully by him to the firm.
f. Rs. 12,000 were recovered from a debtor which was written off as bad debt last year.
8. Parul, Payal and Priyanka are partners. They decided to dissolve the firm. Pass the necessary journal entries
for the following after the various assets (other than cash and Bank) and other outside liabilities have been
transferred to realisation account.
a. There were total debtors of Rs. 76,000. Provision for bad and doubtful debts also stood in the books at Rs.
6,000. Rs. 12,000 debtors proved bad and rest the amount due.
b. Parul agreed to pay off her husband’s loan of Rs. 7,000 at a discount of 5%.
c. A machine which is not recorded in the books was taken over by Payal at Rs. 3,000 whereas its expected
value was Rs. 5,000.
d. Priyanka paid realisation expenses of Rs. 15,000 out of her pocket and she was to get remuneration of
Rs. 18,000 for completing the dissolution process.
e. Contingent liability (not provided for) of Rs. 4,000 was also discharged.
f. The firm had a Debit balance of Rs. 27,000 in the profit and loss account on the date of dissolution.
9. Pass the necessary journal entry for the following transactions on the dissolution of the firm of A, B and C (who
were sharing profits in the ratio of 4:3:3) after the transfer of all assets (other than cash) and external liabilities
to realisation account.
a. K, a creditor, to whom Rs. 6,000 were due to be paid, accepted office equipment Rs. 4,000 and the
balance was paid to him in cash.
b. L, a creditor, to whom Rs.16,000 were due to be paid, took. over machinery at Rs.20,000. Balance was
paid by him in cash.
c. M, an unrecorded creditor of Rs. 9,000 was paid by A at a discount of 10%.
d. The amount of sundry liabilities (including creditors) was Rs. 2,00,000 appearing in the balance sheet,
paid off in full.
e. An unrecorded computer of Rs.5,000 was taken over by B at discount of 10%.
f. C's loan of Rs. 10,000 was discharged along with accrued interest of Rs. 200. ( not yet recorded.)
g. The Loss on dissolution was Rs. 10,000.

2|Page
CLASS: XII ACCOUNTANCY: DISSOLUTION OF A PARTNERSHIP FIRM GRACE GEORGE

10. Pass the necessary journal entry for the following transactions on the dissolution of the firm of P, Q and R (who
were sharing profits in the ratio of 4:3:3) after the transfer of all assets (other than cash) and external liabilities
to realisation account.
a. P, one of the partner was to bear all the realisation expenses for which he was given a Commission of
2% of net cash realised from dissolution. Cash realised from acid was Rs. 50,000 and cash paid for
liability amounted to Rs. 10,000. Expenses of realisation Rs. 2,000 paid by P.
b. Workmen compensation reserve Rs. 60,000, workmen compensation paid Rs. 20,000.
c. Commission received in advance Rs. 2,000 was returned to customers after deducting Rs. 400.
d. There was a bill of Rs. 2,000 under discount. The bill was received from T who proved insolvent and a
first and final dividend of 25% was received from his estate.
e. Bankers (who granted loan of Rs.14,000) accepted stock of Rs. 12,000 at a discount of 20% and the
balance in cash.
f. Prepaid Insurance of Rs. 10,000 and Goodwill of Rs. 1,00,000 were also appearing in the balance sheet
but no other additional information was given with regard to these two items.

11. Pass the necessary journal entry for the following transactions on the dissolution of the firm of Ram and Shyam
(who were sharing profits in the ratio of 3:1) after the transfer of all assets (other than cash) and external
liabilities to realisation account.
a. An unrecorded furniture of Rs. 1,00,000 is taken over by Ram at a discount of 60%.
b. An unrecorded liability of Rs. 60,000 is settled and paid by Shyam at a discount of 40%.
c. A Machine having a book value of Rs. 60,000 is given away to Kartik, a firms creditor of Rs. 88,000 at
an agreed valuation of 80% towards full and final payment of his dues.
d. A Furniture having a book value of Rs. 60,000 is given away to Kartik, a firms creditor of Rs. 88,000 at
a discount of 20% towards partial payment of his dues
e. Amit, a creditor to whom Rs. 40,000 were due, took over patents having a book value of 60,000 at
80%. Balance was paid by him in cash.
f. Ram pays realisation expenses of Rs. 40,000 on behalf of the firm.
g. Firm pays actual realisation expenses of Rs. 36,000 on behalf of Shyam, a partner who has to bear the
expenses.
h. Loan from Ram, a partner of Rs. 44,000 appears on the liability side of the balance sheet of the firm
and the Ram’s capital account has a Debit balance of Rs. 4,000.

12. Following is the balance sheet of A and B as at 31st March 2019

Balance sheet as at 31st March 2019

Liabilities Amount Assets Amount
Sundry creditors 30,000 Cash in hand 500
Bills Payable 8,000 Cash at Bank 8,000
Mrs. A’s loan 5,000 Stock in trade 5,000
Mrs. B’s loan 10,000 Investments 10,000
General Reserve 10,000 Debtors. 20000
Investment Fluctuation fund 1,000 (-) PDD. (2000) 18,000
Capital A/c Plant and Machinery 20,000
A 10000 Building 15,000
B 10000 20,000 Goodwill 4,000
Profit and loss a/c 3,500
84,000 84,000

The firm was the dissolved-on 31st March 2019 and following was agreed.
3|Page
CLASS: XII ACCOUNTANCY: DISSOLUTION OF A PARTNERSHIP FIRM GRACE GEORGE

a. A promised to pay Mrs A' loan and took stock-in-trade at Rs. 4,000.
b. B took half the investments at 10% discount.
c. Debtors realised Rs. 19,000.
d. Creditors and bills payable were due on an average basis of one month after 31st March, but they were
paid immediately on 31st March at 6 % discount for per annum.
e. Plant realised Rs. 25,000; Building Rs. 40,000; Goodwill Rs. 6,000 and remaining Investment at Rs.
4,500.
f. There was an old typewriter in the firm which had been written off completely from the books. It is
now estimated to realise Rs. 300. It was taken away by B at this estimated price.
g. Realisation expenses were Rs. 1,000.
Show the realisation account, partners capital account and bank account in the books of the firm.
13. A and B were partners in a firm sharing profits in the ratio of 3:2. On 31st March 2019, the balance sheet of the
firm was as follows
Balance sheet as at 31st March 2019
Liabilities Amount Assets Amount
Capital a/c Building 2,40,000
A 300000 Furniture 1,75,000
B 200000 5,00,000 Debtors 80,000
Sundry creditors 1,17,000 Stock 75,000
Cash 47,000
6,17,000 6,17,000
The firm was dissolved on 1st April,2019 and the assets and liabilities were settled as follows
a. Building was taken over by creditors as their full and final payment.
b. Furniture was taken over by B for cash payment at 5 % less than the book value.
c. Debtors were collected by a debt collection agency at a cost of Rs.5,000.
d. Stock realised Rs.70,500.
e. B agreed to bear all realisation expenses. For this service, B is paid Rs.500. Actual expense of relisation
amounted to Rs.1000.
Pass necessary journal entries for dissolution of the firm.
14. Achal and Vichal were partners in a firm sharing profits in the ratio of 3:5. On 31 st March 2019, their balance
sheet was as follows
Balance sheet as at 31st March 2019
Liabilities Amount Assets Amount
Capital a/c Land and Building 4,00,000
Achal 3,00,000 Machinery 3,00,000
Vichal 5,00,000 8,00,000 Debtors 2,22,000
Creditors 1,79,000 Cash at Bank 78,000
Employees Provident Fund 21,000

10,00,000 10,00,000
1st
The firm was dissolved on April,2019 and the assets and liabilities were settled as follows
a. Land and Building realised Ra.4,30,000.
b. Debtors realised Rs.2,25,000 (with interest) and Rs.1,000 were recovered for bad debt written off last
year.
c. There was an unrecorded investment which was sold for Rs. 25,000.
d. Vichal took over machinery at Rs. 2,80,000 for cash.
e. 50% of the creditors where paid Rs. 4,000 less in full settlement and the remaining creditor were paid
full amount.
Pass necessary journal entries for dissolution of the firm.
4|Page
CLASS: XII ACCOUNTANCY: DISSOLUTION OF A PARTNERSHIP FIRM GRACE GEORGE

5|Page