Question

Archana, Vandana, and Arti were partners in a firm sharing profits and losses in the ratio \(5 : 3 : 2\). Their Balance Sheet as at 31st March, 2023 was as follows: \[ \begin{array}{|l|r|l|r|} \hline Liabilities & Amount (\rupee) & Assets & Amount (\rupee)
\hline \text{Capitals:} & & \text{Investments} & 80,000
\quad \text{Archana} & 80,000 & \text{Plant} & 1,00,000
\quad \text{Vandana} & 70,000 & \text{Stock} & 40,000
\quad \text{Arti} & 60,000 & \text{Debtors} & 50,000
\text{General Reserve} & 30,000 & \text{Cash at Bank} & 30,000
\text{Creditors} & 60,000 & &
\hline Total & 3,00,000 & Total & 3,00,000
\hline \end{array} \] \vspace{0.5cm} The firm was dissolved on the above date: (i) Assets were realised as follows: \[ \text{Debtors = \rupee40,000}, \quad \text{Stock = \rupee50,000}, \quad \text{Plant = \rupee60,000}. \] (ii) \(25\%\) of the investments were taken over by Vandana at \rupee18,000. Remaining investments were taken over by Archana at \(10\%\) less than book value. (iii) Expenses of realisation \rupee20,000 were paid by Arti. Prepare Realisation Account. \vspace{0.5cm}

Hint:

In a Realisation Account, assets are transferred to the debit side, and liabilities are transferred to the credit side. Realisation expenses and profit/loss are adjusted through capital accounts.

Answer 1

\[ \text{Realisation Account} \] \begin{center} \begin{tabular}{|l|l|r|l|r|} \hline Particulars & Amount (\rupee) & Particulars & Amount (\rupee)
\hline \text{To Sundry Assets:} & & \text{By Creditors (Paid)} & 60,000
\quad Investments & 80,000 & \text{By Cash (Debtors Realised)} & 40,000
\quad Plant & 1,00,000 & \text{By Cash (Stock Realised)} & 50,000
\quad Stock & 40,000 & \text{By Cash (Plant Realised)} & 60,000
\quad Debtors & 50,000 & \text{By Vandana (Investments)} & 18,000
& & \text{By Archana (Investments)} & 54,000
\cline{1-2} \text{To Cash (Realisation Expenses)} & 20,000 & \text{By Profit Transferred:} &
\text{To Capital Accounts:} & & \quad Archana & 12,000
\quad Archana (Profit Share) & 12,000 & \quad Vandana & 7,200
\quad Vandana (Profit Share) & 7,200 & \quad Arti & 4,800
\quad Arti (Profit Share) & 4,800 & &
\hline Total & 3,54,000 & Total & 3,54,000
\hline \end{tabular} \end{center} \vspace{0.5cm} Working Notes: 1. Realisation of Investments:
- \(25\%\) of investments = \(\frac{25}{100} \times 80,000 = \rupee20,000\).
- Taken over by Vandana at \rupee18,000.
- Remaining \(75\%\) of investments = \rupee60,000.
- Taken over by Archana at \(10\%\) less = \(\rupee60,000 - \rupee6,000 = \rupee54,000\).
2. Realisation Profit: Total Realisation = \rupee60,000 + \rupee50,000 + \rupee40,000 + \rupee18,000 + \rupee54,000 = \rupee2,22,000. Less: Realisation Expenses and Creditors = \rupee60,000 + \rupee20,000 = \rupee80,000. Profit on Realisation = \rupee2,22,000 - \rupee80,000 = \rupee42,000. 3. Profit Sharing:
Profit shared in the ratio \(5 : 3 : 2\):
- Archana = \(\frac{5}{10} \times 42,000 = \rupee21,000\).
- Vandana = \(\frac{3}{10} \times 42,000 = \rupee12,600\).
- Arti = \(\frac{2}{10} \times 42,000 = \rupee8,400\).