Question

Madhavan, Chatterjee and Pillai were partners in a firm sharing profits and losses in the ratio of 2 : 1 : 2. On 31stMarch, 2024, their Balance Sheet was as follows :

Balance Sheet of Madhavan, Chatterjee and Pillai as at 31^st March, 2024

 

Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	1,10,000	Cash at Bank	4,05,000
Outstanding Expenses	17,000	Stock	2,20,000
Mrs. Madhavan’s Loan	2,00,000	Debtors	95,000
Chatterjee’s Loan	1,70,000	Less: Provision for Doubtful Debts	(5,000)
Capitals:	Madhavan – 2,00,000	Land and Building	1,82,000
	Chatterjee – 1,00,000	Plant and Machinery	1,00,000
	Pillai – 2,00,000
Total	9,97,000	Total	9,97,000

On the above date, the firm was dissolved and the following transactions took place :
Debtors were taken over by the creditors in full settlement of their claim.
Madhavan agreed to pay Mrs. Madhavan’s loan.
50% of the stock was taken over by Chatterjee at 10% less than the book value. The remaining stock was sold at a profit of 20%.
Land and Building was taken over by Pillai for \(₹1,00,000\) and Plant and Machinery was sold as scrap for \(₹20,000\).
Realisation expenses \(₹17,000\) were paid by cheque.
Prepare Realisation Account.

Hint:

When preparing the Realisation Account: \begin{itemize} \item Record all assets (except cash/bank) on the debit side. \item Record liabilities settled and assets realised on the credit side. \item Account for any losses or gains in the partners' capital accounts in their profit-sharing ratio. \end{itemize}

Answer 1

Realisation Account

Particulars	Amount (₹)	Particulars	Amount (₹)
Debited: Stock	2,20,000	Credited: Chatterjee (50% of ₹2,20,000 − 10% discount)	99,000
Debited: Debtors	95,000	Credited: Creditors (settlement for Debtors)	90,000
Debited: Land and Building	1,82,000	Credited: Pillai (for Land & Building)	1,00,000
Debited: Plant and Machinery	1,00,000	Credited: Bank (sale of Machinery as scrap)	20,000
Debited: Bank (Realisation Expenses)	17,000	Credited: Bank (sale of remaining stock: ₹1,10,000 + 20% premium)	1,32,000
		Credited: Loss transferred to Capital A/c (Balancing Figure)	73,000
Total Debit	6,14,000	Total Credit	5,14,000