Pradeep and Rajesh were partners in a firm sharing profits and losses in the ratio of 3:2. They decided to dissolve their partnership firm on 31st March, 2018. Pradeep was deputed to realize the assets and to pay off the liabilities. He was paid ₹ 1,000 as commission for his services. The financial position of the firm on 31st March, 2018 was as follows:
Balance Sheet
As at March 31, 2018
Liabilities | Amount (Rs.) | Assets | Amount (Rs.) |
Creditors | 80,000 | Building | 1,20,000 |
Mrs Pradeep’s Loan | 40,000 | Investment | 30,600 |
Rajesh’s loan | 24,000 | Debtors 34,000 | |
Investment Fluctuation Fund | 8,000 | Less: Provision for Doubtful Debts 4,000 | 30,000 |
Capitals: | Bills Receivable | 37,400 | |
Pradeep 42,000 | Bank | 6000 | |
Rajesh 42,000 | 84,000 | Profit and Loss A/c (Dr.) | 8,000 |
Goodwill | 4,000 | ||
Total | 2,36,000 | Total | 2,36,000 |
Following terms and conditions were agreed upon:
- Pradeep agreed to pay off his wife’s loan.
- Half of the debtor’s realized ₹ 12,000 and remaining debtors were used to pay off 25% of the creditors.
- Investment sold to Rajesh for ₹ 27,000.
- Building realized ₹ 1,52,000
- Remaining creditors were to be paid after two months, they were paid immediately at 10% p.a. discount
- Bill receivables were settled at a loss of ₹ 1,400
- Realization expenses amounted to ₹ 2,500
Prepare Realization Account.
Marks-6, CBSE:2018-19/Sample/Q-14