Question

On the basis of the following data, final payment to a partner on firm's dissolution will be: Debit balance of Capital Account of the partner was ₹ 50,000. Share of profit on realisation was ₹ 1,00,000. Firm's liability taken over by him was for ₹ 8,000.

• A. ₹ 32,000
• B. ₹ 58,000
• C. ₹ 42,000
• D. ₹ 52,000

Hint:

Always treat a "Debit Balance" in a capital account as a negative number when calculating final payments. Conversely, "Profit" and "Liabilities Taken Over" act as additions to the partner's claim.

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
During the dissolution of a partnership firm, the final settlement with a partner is calculated by adjusting their opening capital balance with their share of realization profits/losses and any liabilities they have assumed on behalf of the firm.
Step 2: Key Formula or Approach:
The final payment is calculated using the following adjustment logic:
\[ \text{Final Settlement} = \text{Opening Balance} + \text{Realisation Profit} + \text{Liability Taken Over} - \text{Realisation Loss} \] Note: A Debit balance in a capital account represents an amount the partner owes the firm (a negative claim), while a Credit balance represents the firm's liability to the partner.
Step 3: Detailed Explanation:
Based on the provided data:
1. Opening Balance (Debit): \( -50,000 \) (This must be subtracted or treated as a negative start).
2. Share of Realisation Profit: \( +1,00,000 \) (This increases the partner's claim).
3. Liability Taken Over: \( +8,000 \) (When a partner pays a firm's debt, the firm now owes that amount to the partner).
Calculation:
\[ \text{Final Payment} = (-50,000) + 1,00,000 + 8,000 \]
\[ \text{Final Payment} = 1,08,000 - 50,000 \]
\[ \text{Final Payment} = 58,000 \]
Step 4: Final Answer:
The final payment to be made to the partner upon dissolution is 58,000.
Therefore, the correct option is (b).