Settlement of Partners loan

 Treatment of Goodwill
 Asset taken over by partner
 Liability paid by partner
 Following is the balance sheet of A and B shared profit and losses in
the ratio of 3:2
Liabilities Rs Assets Rs
Creditors 20,000 Cash at bank 7,000
A Capital 1,50,000 Debtors 40,000
B Capital 90,000 Less provision – 1,800 38,200
Stock 54,800
Machinery 40,000
Land and building 1,20,000
2,60,000 2,60,000
The firm was dissolved on and the following was agreed upon :-
1. Stock Rs 45,000
2. Machinery 20% less than book value
3. Debtors Rs 35,000
4. Land and building Rs 30,000 more than book value.
5. Creditors agreed to accept 5%.
6. Expenses of realization amounted to Rs 12,00
 Following is the balance sheet of A and B shared profit and losses in
the ratio of 3:2
Liabilities Rs Assets Rs
Creditors 20,000 Cash at bank 7,000
A Capital 1,50,000 Debtors 40,000
B Capital 90,000 Less provision – 1,800 38,200
Stock 54,800
Machinery 40,000
Land and building 1,20,000
2,60,000 2,60,000

Dr. Realization A/c Cr.

Particulars Amount Particulars Amount
To Debtors 40,000 By Creditors 20,000
To Building 1,20,000
To Machinery 40,000 By provision for doubtful debts 1,800
To Stock 54,800
 Following is the balance sheet of A and B shared profit and losses in
the ratio of 3:2
Liabilities Rs Assets Rs
Creditors 20,000 Cash at bank 7,000
A Capital 1,50,000 Debtors 40,000
B Capital 90,000 Less provision – 1,800 38,200
Stock 54,800
Machinery 40,000
Land and building 1,20,000
2,60,000 2,60,000

Partners capital A/c

Particulars A B Particulars A B
By Balance B/d 1,50,000 90,000
 Following is the balance sheet of A and B shared profit and losses in
the ratio of 3:2
Liabilities Rs Assets Rs
Creditors 20,000 Cash at bank 7,000
A Capital 1,50,000 Debtors 40,000
B Capital 90,000 Less provision – 1,800 38,200
Stock 54,800
Machinery 40,000
Land and building 1,20,000
2,60,000 2,60,000

Bank A/c
Particulars Amount Particulars Amount
To Balance b/d 7,000
 The firm was dissolved on and the following was agreed upon :-
1. Stock Rs 45,000
2. Machinery 20% less than book value
3. Debtors Rs 35,000
4. Land and building Rs 30,000 more than book value.
5. Creditors agreed to accept 5%.
6. Expenses of realization amounted to Rs 12,00
Dr. Realization A/c Cr.
Particulars Amount Particulars Amount
To Debtors 40,000 By Creditors 20,000
To Building 1,20,000
To Machinery 40,000 By Provision for doubtful debts 1,800
To Stock 54,800 By Bank A/c
Stock 45,000
To Bank (Creditors) 19,000 Machinery 32,000
To Bank (realization exp) 1200 Debtors 35,000
To Profit Transferred to Land and building 1,50,000 2,62,000
To A’s capital 5,280
To Bs capital 3,520 8,800

2,83,800 2,83,800
Dr. Realization A/c Cr.
Particulars Amount Particulars Amount
To Debtors 40,000 By Creditors 20,000
To Building 1,20,000
To Machinery 40,000 By Provision for doubtful debts 1,800
To Stock 54,800 By Bank A/c
Stock 45,000
To Bank (Creditors) 19,000 Machinery 32,000
To Bank (realization exp) 1200 Debtors 35,000
To Profit Transferred to Land and building 1,50,000 2,62,000
To A’s capital 5,280
To Bs capital 3,520 8,800

2,83,800 2,83,800

Bank A/c
Particulars Amount Particulars Amount
To Balance b/d 7,000 By Realization(Creditors) 19,000
To Realization 2,62,000 By Realization (real exp) 1200
(assets realized)
Dr. Realization A/c Cr.
Particulars Amount Particulars Amount
To Debtors 40,000 By Creditors 20,000
To Building 1,20,000
To Machinery 40,000 By Provision for doubtful debts 1,800
To Stock 54,800 By Bank A/c
Stock 45,000
To Bank (Creditors) 19,000 Machinery 32,000
To Bank (realization exp) 1200 Debtors 35,000
To Profit Transferred to Land and building 1,50,000 2,62,000
To A’s capital 5,280
To Bs capital 3,520 8,800

2,83,800 2,83,800

Partners capital A/c

Particulars A B Particulars A B
By Balance B/d 1,50,000 90,000
By realization A/c 5,280 3,520
Dr. Realization A/c Cr.
Particulars Amount Particulars Amount
To Debtors 40,000 By Creditors 20,000
To Building 1,20,000
To Machinery 40,000 By Provision for doubtful debts 1,800
To Stock 54,800 By Bank A/c
Stock 45,000
To Bank (Creditors) 19,000 Machinery 32,000
To Bank (realization exp) 1200 Debtors 35,000
To Profit Transferred to Land and building 1,50,000 2,62,000
To A’s capital 5,280
To Bs capital 3,520 8,800

2,83,800 2,83,800

Partners capital A/c

Particulars A B Particulars A B
To Bank (final 1,55,280 93,520 By Balance B/d 1,50,000 90,000
payment) By realization A/c 5,280 3,520

1,55,280 93,520 1,55,280 93,520

 Partners Capital A/c
Particulars A B Particulars A B
To Bank (final 1,55,280 93,520 By Balance B/d 1,50,000 90,000
payment) By realization A/c 5,280 3,520

1,55,280 93,520 1,55,280 93,520

Bank A/c
Particulars Amount Particulars Amount
To Balance b/d 7,000 By Realization(Creditors) 19,000
To Realization 2,62,000 By Realization (real exp) 1200
(assets realized) By A’s capital 1,55,280
By B’s capital 93,520

2,69,000 2,69,000
 Liabilities Rs Assets Rs
Creditors 18,500 Bank Balance 1,000
Mrs X loan 5,000 Debtors 15,000
X’s Loan 8,000 Less provision 1,000 14,000
Investment Fluctuating Fund 7,500 Stock 80,000
X Capital 75,000 Investment 20,000
Y Capital 66,000 Plant 75,000
Z Capital 45,000 Goodwill 35,000

The firm was dissolved

1. X took away all investments at 25% more than book value
2. Y took over debtors amounted to 5000 at Rs 4000. remaining debtors
realized 75% of their book value.
3. Stock is sold for Rs 59,000 and plant is sold for Rs 40,000
4. There was liability for Rs 8000 for damages paid by the firm.
5. Realization expenses amounted to Rs. 1000
Dr. Realization A/c Cr.
Particulars Amount Particulars Amount
To Debtors 10,000 By Creditors 18,500

To Stock 80,000 By Mrs X Loan 5,000

To Investments 20,000 By Investment Fluctuating fund 7,500
To Plant 75,000 By Provision doubtful debts 1,000
To Goodwill 35,000
By X’s Capital ( Investment) 25,000
By Ys Capital ( Debtors) 4,000
To Bank (realization exp) 1,000 By Bank A/c
To bank (damages) 2,000 Debtors 7,500
Stock 59,000
Plant 40,000 1,06500
To bank (Creditors) 18,500 By Capital (realization loss)
To bank (Mrs X Loan) 20,000 By X’s Capital 4,500
By Ys Capital 30,000
By Z’s Capital 15,000

2,57,500 2,57,500
Dr. Realization A/c Cr.
Particulars Amount Particulars Amount
To Debtors 15,000 By Creditors 18,500

To Stock 80,000 By Mrs X Loan 5,000

To Investments 20,000 By Investment Fluctuating fund 7,500
To Plant 75,000 By Provision doubtful debts 1,000
To Goodwill 35,000
By X’s Capital ( Investment) 25,000
By Ys Capital ( Debtors) 4,000
To Bank (realization exp) 1,000 By Bank A/c
To bank (damages) 2,000 Debtors 7,500
Stock 59,000
Plant 40,000 1,06500
To bank (Creditors) 18,500 By Capital (realization loss)
To bank (Mrs X Loan) 20,000 By X’s Capital 45,000
By Ys Capital 30,000
By Z’s Capital 15,000

2,57,500 2,57,500

X’s loan Account

Particulars Amount Particulars Amount
To Bank A/c 8,000 By Balance B/d 8,000
8,000 8,000
 Partners capital A/c
Particulars A B C Particulars A B C

To realization 25,000 4,000 By Balance B/d 75,000 66,000 44,000

Assets taken
To realization
45,000 30,000 15,000
(loss
To Bank
5,000 32,000 30,000
(Final Payment )
75,000 66,000 45,000 75,000 66,000 45,000

Cash/Bank A/c
Particulars Amount Particulars Amount
To Balance b/d 1,000 By Realization (Expenses) 1,000
To Realization A/c 1,06,500 By Realization (Damages) 8,000
(Assets Sold) By Realization(Liabilities) 23,500
By X’s loan 8,000

By X’s Capital 5,000

By Y’s Capital 32,000

By Z’s Capital 30,000

1,07,500 1,07,500