John, Tom and Harry are in partnership sharing profits and losses in the ratio 4:3:3 respectively. On January 1, 2015 they decided to dissolve the partnership. The Balance Sheet on December 31, 2014 was as follows: Details/Accts $ $ Details/Accts $ $ Capital Accounts: Fixed Assets (NBV) John 4,000,000 Furniture etc. 3,400,000 Tom 3,000,000 Motor vehicles 2,500,000 Harry 2,000,000 9,000,000 5,900,000 Current Accounts: Current Assets John 1,000,000 Stock 2,000,000 Tom 700,000 Debtors 4,100,000 Harry 500,000 2,200,000 Investments 1,400,000 Loan 2,800,000 Cash and bank 2,100,000 9,600,000 Creditors 1,500,000 ------------- 15,500,000 15,500,000 Notes: The furniture, etc. were sold for $3,550,000 and John took control of a motor car which was valued at $700,000 in the books. It was decided to let John have the car for $750,000. The rest of the vehicles were sold for $2,600,000. Repairs cost paid for the vehicles amounted to $80,000. Accounts receivable realised $3,920,000 while accounts payable were settled for $1,300,000. The investments were settled for $1,320,000. The loan along with the interest applicable was repaid completely as at December 31, 2014. Expenses incurred in dissolving the business amounted to $100,000 The stocks were sold for 2,200,000. Required: The partners’ capital accounts on dissolution. The Realisation Account on dissolution. The cash/bank account
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
John, Tom and Harry are in
|
Details/Accts |
$ |
$ |
Details/Accts |
$ |
$ |
|
Capital Accounts: |
|
|
Fixed Assets (NBV) |
|
|
|
John |
4,000,000 |
|
Furniture etc. |
|
3,400,000 |
|
Tom |
3,000,000 |
|
Motor vehicles |
|
2,500,000 |
|
Harry |
2,000,000 |
9,000,000 |
|
|
5,900,000 |
|
Current Accounts: |
|
|
Current Assets |
|
|
|
John |
1,000,000 |
|
Stock |
2,000,000 |
|
|
Tom |
700,000 |
|
Debtors |
4,100,000 |
|
|
Harry |
500,000 |
2,200,000 |
Investments |
1,400,000 |
|
|
Loan |
|
2,800,000 |
Cash and bank |
2,100,000 |
9,600,000 |
|
Creditors |
|
1,500,000 |
|
|
------------- |
|
|
|
15,500,000 |
|
|
15,500,000 |
Notes:
- The furniture, etc. were sold for $3,550,000 and John took control of a motor car which was valued at $700,000 in the books. It was decided to let John have the car for $750,000. The rest of the vehicles were sold for $2,600,000. Repairs cost paid for the vehicles amounted to $80,000.
Accounts receivable realised $3,920,000 while accounts payable were settled for $1,300,000. The investments were settled for $1,320,000.- The loan along with the interest applicable was repaid completely as at December 31, 2014. Expenses incurred in dissolving the business amounted to $100,000
- The stocks were sold for 2,200,000.
Required:
- The partners’ capital accounts on dissolution.
- The Realisation Account on dissolution.
- The cash/bank account
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