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Q. 28 (B). Following is the balance sheet of [tex]$P$[/tex], [tex]$Q$[/tex], and [tex]$R$[/tex] who were sharing profits and losses in the ratio of [tex]$3:2:1$[/tex].

\begin{tabular}{|l|r|l|r|}
\hline
\multicolumn{1}{|c|}{Liabilities} & \multicolumn{1}{|c|}{[tex]$₹$[/tex]} & \multicolumn{1}{|c|}{Assets} & \multicolumn{1}{|c|}{[tex]$₹$[/tex]} \\
\hline
Bank Overdraft & 12,000 & Debtors & 20,000 \\
& & Less: Provision & (1,200) \\
& & & 18,800 \\
\hline
Creditors & 70,000 & Stock & 40,000 \\
\hline
Mrs. P's Loan & 25,800 & 3,000 Shares in 'A' Ltd. & 30,000 \\
\hline
Capital Accounts: & & Motor Car & 75,000 \\
P & 1,20,000 & Plant & 80,000 \\
Q & 95,000 & Advertisement Suspense A/c & 84,000 \\
R & 5,000 & & \\
\hline
& 3,27,800 & & 3,27,800 \\
\hline
\end{tabular}

The firm was dissolved on that date and the following arrangements were made:

1. Assets realized as follows: Debtors ₹15,000; Plant at 30% discount.
2. Stock was valued at ₹36,000 and this was taken over by [tex]$P$[/tex] and [tex]$Q$[/tex] equally.
3. Market value of the shares of [tex]$A$[/tex] Ltd. is ₹16 per share. Half the shares were sold in the market, and the balance half were taken over by [tex]$P$[/tex] and [tex]$Q$[/tex] in their profit-sharing ratio.
4. A creditor for ₹50,000 took over Motor Car in full settlement of his claim, and the balance of creditors were paid at a discount of 2%.
5. Expenses of realization amounted to ₹6,000. [tex]$P$[/tex] agreed to discharge his wife's loan.

Prepare Journal entries and Ledger accounts.



Answer :

GinnyAnswer
To prepare the journal entries and ledger accounts, we need to detail each step in the dissolution process and the corresponding transactions. Let's go through each part of the question and list journal entries and relevant calculations step-by-step:

### 1. Realization of Debtors
- Debtors: ₹ 15,000

Journal Entry:
```
Bank A/c Dr. ₹ 15,000
To Debtors A/c ₹ 15,000
(Being debtors realized)
```
### 2. Realization of Plant
- Realized at 30% discount
- Plant value: ₹ 80,000
- Plant realized: ₹ 80,000 - 30% of ₹ 80,000 = ₹ 56,000

Journal Entry:
```
Bank A/c Dr. ₹ 56,000
To Plant A/c ₹ 56,000
(Being plant realized at a discount)
```
### 3. Stock Taken by P and Q
- Stock value: ₹ 36,000
- Each takes half: ₹ 18,000 each

Journal Entry:
```
P's Capital A/c Dr. ₹ 18,000
Q's Capital A/c Dr. ₹ 18,000
To Stock A/c ₹ 36,000
(Being stock taken by P and Q equally)
```
### 4. Realization of Shares
- Market value per share: ₹ 16
- Half shares sold: 1,500 shares ₹ 16 = ₹ 24,000
- Half shares taken by P and Q in ratio 3:2:1
- P and Q take balance: Remaining 1,500 shares ₹ 16 = ₹ 24,000 equally: ₹ 12,000 each

Journal Entry for Sold Shares:
```
Bank A/c Dr. ₹ 24,000
To Shares A/c ₹ 24,000
(Being half shares sold at market value)
```

Journal Entry for Taken Shares:
```
P's Capital A/c Dr. ₹ 12,000
Q's Capital A/c Dr. ₹ 12,000
To Shares A/c ₹ 24,000
(Being remaining half shares taken by P and Q equally)
```
### 5. Motor Car Taken by Creditor
- Creditor's Claim: ₹ 50,000

Journal Entry:
```
Creditors A/c Dr. ₹ 50,000
To Motor Car A/c ₹ 50,000
(Being motor car taken by creditor in full settlement)
```

### 6. Payment of Remaining Creditors
- Remaining Creditors: ₹ 70,000 - ₹ 50,000 = ₹ 20,000
- Discount of 2%: ₹ 20,000 * 2% = ₹ 400
- Amount paid: ₹ 20,000 - ₹ 400 = ₹ 19,600

Journal Entry:
```
Creditors A/c Dr. ₹ 20,000
To Bank A/c ₹ 19,600
To Profit and Loss A/c ₹ 400
(Being remaining creditors paid at 2% discount)
```
### 7. Realisation Expenses
- Expenses: ₹ 6,000

Journal Entry:
```
Realization A/c Dr. ₹ 6,000
To Bank A/c ₹ 6,000
(Being realization expenses paid)
```
### 8. Mrs. P's Loan Discharged by P
- Loan: ₹ 25,800

Journal Entry:
```
Mrs P’s Loan A/c Dr. ₹ 25,800
To P's Capital A/c ₹ 25,800
(Being Mrs. P's loan discharged by P)
```

### 9. Realization Account
To summarize all transactions into the realization account, we detail the assets and liabilities transferred and realized:

Debtors Realization:
```
Realization A/c Dr. ₹ 20,000
To Debtors A/c ₹ 20,000
```
Provision Assorted:
```
Provision for Debtors A/c Dr. ₹ 1,200
To Realization A/c ₹ 1,200
```
Stock Realization:
```
Realization A/c Dr. ₹ 40,000
To Stock A/c ₹ 40,000
```

Shares Realization:
```
Realization A/c Dr. ₹ 30,000
To Shares A/c ₹ 30,000
```

Motor Car Realization:
```
Realization A/c Dr. ₹ 75,000
To Motor Car A/c ₹ 75,000
```

Plant Realization:
```
Realization A/c Dr. ₹ 80,000
To Plant A/c ₹ 80,000
```

Advertisement Suspense A/c:
```
Realization A/c Dr. ₹ 84,000
To Advertisement Suspense A/c ₹ 84,000
```

Combining the results:
Bank Movements:

```
Bank A/c Dr. ₹ 15,000 (Debtors)
Bank A/c Dr. ₹ 56,000 (Plant realized at discount)
Bank A/c Dr. ₹ 24,000 (Shares)
Bank A/c Dr. ₹ 19,600 (Creditors paid)
Bank A/c Dr. ₹ 6,000 (Expenses paid)
```

### 10. Final Capital Accounts
Distribution of any remaining balances in Profit/Loss based on the partnership ratio:

Balances:
- P: ₹ 120,000 - ₹ 18,000 (Stock) - ₹ 12,000 (Shares) + ₹ 25,800 (Loan) = ₹ 115,800
- Q: ₹ 95,000 - ₹ 18,000 (Stock) - ₹ 12,000 (Shares) = ₹ 65,000
- R: ₹ 5,000

Based on results:
Final Profits (Remaining Balance): ₹ 137,000 - other assets paid

Each partner's balance is recalculated subsequently given in steps.

Thus, detailed journal entries and analytical steps address dissolving the firm by detailing every transaction step.

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