J, S and R were in partnership sharing profts and losses in the ratio of 3:2:1. Therir balance sheet as on 31st Decmebr, 1999 was as follows:
Liabilities :
Capital Accounts
J:24,000
S: 17,200
R: 20,800
Reserve Fund: 6,000
Employees' Provident Fund: 6,000
Depreciation Reserve 10,000
Creditors 22,000
Total: 1,06,000
ASSETS:
Buldings: 20,000
Plant: 44,000
Stock 12000
Joint Life Policy 12,400
Debtors 10,000
Accrued Interest 2,000
Cash 5,600
Total: 1,06,000
It was agreed to dissolve the firm and the terms of the dissolution were:
- J took over Buildings at book walue and agreed to pay off creditors.
- Accured interst was not collected whereas there was a contingent liability of Rs 1,200 which was met
- Other assets realised: Plant: 50,000 Stock :10,000 Debtors:9,200
- Realisation expenses: 1200
Prepare Realisation account , Capital accoounts and Cash account.
ALSO EXPLAIN ME THE TREATMENT FOR EMPLOYEES PROVIDENT FUND AND DEPRECIATION RESERVE.
Realisation A/c | ||||
Dr. | Cr. | |||
Particulars | Amount (Rs) | Particulars | Amount (Rs) | |
Building | 20,000 | Creditors | 22,000 | |
Plant | 44,000 | Employee Provident Fund | 6,000 | |
Stock | 12,000 | Depreciation Reserve | 10,000 | |
Joint Life Policy | 12,400 | J’s Capital A/c (Building) | 20,000 | |
Debtors | 10,000 | Cash A/c (assets realised) |
| |
Accrued Interest | 2,000 | Plant | 50,000 |
|
J’s Capital A/c (Creditors) | 22,000 | Stock | 10,000 |
|
Cash A/c (Employees Provident Fund) | 6,000 | Debtors | 9,200 | 69,200 |
Cash A/c (Realisation Expenses) | 1,200 | Loss on realization transferred to: |
| |
Cash A/c (Contingent Liability) | 1,200 | J’s Capital A/c | 1,800 |
|
|
| S’s Capital A/c | 1,200 |
|
|
| R’s Capital A/c | 600 | 3,600 |
| 1,30,800 |
| 1,30,800 | |
|
|
|
| |
Partners’ Capital A/c | |||||||
Dr. |
| Cr. | |||||
Particulars | J | S | R | Particulars | J | S | R |
Realisation A/c (Building) | 20,000 |
|
| Balance b/d | 24,000 | 17,200 | 20,800 |
Realisation A/c (Loss) | 1,800 | 1,200 | 600 | Reserve Fund | 3,000 | 2,000 | 1,000 |
Cash A/c (balancing figure) | 27,200 | 18,000 | 21,200 | Realisation A/c (Creditors) | 22,000 |
|
|
| 49,000 | 19,200 | 21,800 |
| 49,000 | 19,200 | 21,800 |
|
|
|
|
|
|
|
|
Cash A/c | |||
Dr. | Cr. | ||
Particulars | Amount (Rs) | Particulars | Amount (Rs) |
Balance b/d | 5,600 | Realisation A/c (Employees Provident Fund) | 6,000 |
Realisation A/c (assets realised) | 69,200 | Realisation A/c (Realisation Expenses) | 1,200 |
|
| Realisation A/c (Contingent Liability) | 1,200 |
|
| J’s Capital A/c | 27,200 |
|
| S’s Capital A/c | 18,000 |
|
| R’s Capital A/c | 21,200 |
| 74,800 |
| 74,800 |
|
|
|
|
Note- In the absence of any information about realisation of Joint Life Policy, it has been assume that JLP have not realized any amount.
Accounting Treatment of:
Employees Provident Fund: As it is a liability that relates to third party therefore it is first transferred to credit side of realisation account and subsequently paid-off .
Depreciation Reserve: As it is not an actual liability therefore it is only transferred to realisation account and not paid-off .