Worked Solution
✓ VerifiedDissolution of Ram, Wazir and Adil — 31st March, 2019
Profit Sharing Ratio: Ram 4/9 : Wazir 2/9 : Adil 3/9 (i.e., 1/3 = 3/9)
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REALIZATION ACCOUNT
| Dr. Particulars | ₹ | Cr. Particulars | ₹ |
|---|---|---|---|
| To Plant & Machinery A/c | 30,000 | By Provision for Bad Debts A/c | 400 |
| To Fixtures & Fittings A/c | 2,000 | By Joint Life Policy Reserve A/c | 12,400 |
| To Stock A/c | 10,400 | By Bank A/c — Plant & Machinery | 17,000 |
| To Sundry Debtors A/c | 18,400 | By Bank A/c — Fixtures & Fittings | 1,000 |
| To Joint Life Policy A/c | 15,000 | By Bank A/c — Stock | 9,000 |
| To Patents & Trademarks A/c | 10,000 | By Bank A/c — Debtors | 16,500 |
| To Bank A/c (Realization Expenses) | 2,300 | By Bank A/c — JLP (net cash received) | 10,200 |
| By Adil's Capital A/c (JLP loan + interest deducted) | 5,300 | ||
| By Bank A/c — Patents (remaining, 50% of ₹4,000) | 2,000 | ||
| By Sundry Creditors A/c — Patents taken at value | 4,500 | ||
| By Sundry Creditors A/c — Discount allowed | 500 | ||
| By Loan on Hypothecation A/c — Shares (written off) accepted | 3,000 | ||
| By Partners' Capital A/cs — Loss on Realization: | |||
| Ram ₹2,800 + Wazir ₹1,400 + Adil ₹2,100 | 6,300 | ||
| Total | 88,100 | Total | 88,100 |
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BANK ACCOUNT
| Dr. Particulars | ₹ | Cr. Particulars | ₹ |
|---|---|---|---|
| To Balance b/d | 8,000 | By Realization A/c (Expenses) | 2,300 |
| To Realization A/c — Plant & Machinery | 17,000 | By Ram's Loan A/c | 15,000 |
| To Realization A/c — Fixtures & Fittings | 1,000 | By Sundry Creditors A/c (cash paid) | 12,800 |
| To Realization A/c — Stock | 9,000 | By Loan on Hypothecation A/c (cash paid) | 3,200 |
| To Realization A/c — Debtors | 16,500 | By Ram's Capital A/c | 27,200 |
| To Realization A/c — JLP (net) | 10,200 | By Wazir's Capital A/c | 8,600 |
| To Realization A/c — Patents (remaining) | 2,000 | ||
| To Adil's Capital A/c (deficit brought in) | 5,400 | ||
| Total | 69,100 | Total | 69,100 |
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PARTNERS' CAPITAL ACCOUNTS (Columnar)
| Particulars | Ram ₹ | Wazir ₹ | Adil ₹ | Particulars | Ram ₹ | Wazir ₹ | Adil ₹ |
|---|---|---|---|---|---|---|---|
| To Realization A/c (JLP loan) | — | — | 5,300 | By Balance b/d | 30,000 | 10,000 | 2,000 |
| To Realization A/c (Loss) | 2,800 | 1,400 | 2,100 | By Bank A/c (deficit) | — | — | 5,400 |
| To Bank A/c (final payment) | 27,200 | 8,600 | — | ||||
| Total | 30,000 | 10,000 | 7,400 | Total | 30,000 | 10,000 | 7,400 |
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Key conclusions: Loss on Realization = ₹6,300 (distributed 4:2:3). Adil's Capital falls into deficit of ₹5,400 (due to JLP loan of ₹5,300 + loss share ₹2,100 exceeding his opening capital of ₹2,000), which he contributes in cash. Ram and Wazir receive ₹27,200 and ₹8,600 respectively from bank after Ram's loan of ₹15,000 is paid separately.
Write it like this
1The skeleton
- Open all three accounts simultaneously on your page — draw Realization, Bank, and columnar Capital side by side in your rough first, so you never have to flip back and correct a totaled account mid-answer.
- Load Realization Dr. side first with ALL asset book values — Plant, Fixtures, Stock, Debtors (gross, not net), JLP, Patents — this signals to the examiner you know the golden rule: every asset enters at book value, no exceptions.
- Handle the JLP transaction in one shot on the Cr. side — split it into Bank ₹10,200 + Adil's Capital ₹5,300 (loan ₹5,000 + interest ₹300); examiner specifically checks whether you correctly routed the deduction to Adil's Capital, not to Bank.
- Show the written-off shares as a Cr. entry to Realization — 'By Loan on Hypothecation A/c ₹3,000'; most students panic here because shares don't appear on the Balance Sheet — your working note must explicitly say 'shares were written off, hence not in BS, now recovered at ₹3,000'.
- Compute the Realization loss LAST after balancing, then split 4:2:3 — write the ratio as 4/9 : 2/9 : 3/9 explicitly in your working note so the examiner sees you verified it sums to 1 before distributing.
- Close Adil's Capital deficit via Bank Account — when Adil's Capital goes negative after JLP deduction + loss share, show 'To Adil's Capital A/c ₹5,400' on the Dr. side of Bank, with a working note proving the deficit calculation step by step.
2Examiner-rewarded phrases
3Common trap
Heads up — the single biggest mark-killer here is treating the JLP net receipt of ₹10,200 as the only Realization credit entry for the policy; you MUST also credit ₹5,300 to Adil's Capital (not Bank), otherwise your Realization Account won't balance and your Capital Account for Adil will be wrong — that's an easy 3–4 marks gone on a single line item.