Theory question 105
Partnership Admission, Retirement and DissolutionKadiri and Bello are trading partners. Their Balance Sheet as at 31st December 1986 when the partnership was dissolved was as follows:
Kadiri and Bello Balance Sheet as at 31/12/86
Capital: Kadiri ₦2,500; Bello ₦2,500
Creditors: ₦2,000
Total: ₦7,000
Furniture: ₦1,000
Stock: ₦3,000
Debtors: ₦2,000
Cash: ₦1,000
Total: ₦7,000
Additional Information: (a) Profits and Losses are shared equally. (b) All the assets (except cash) realised ₦7,500 (c) Creditors were paid off and dissolution expenses of ₦300 were also paid. You are required to prepare: (i) Realisation Account (ii) Cash Book (iii) Partner's Capital Accounts (iv) Creditor Account.
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(i) Realisation Account: Dr furniture 1,000, stock 3,000, debtors 2,000, cash (expenses) 300, profit on realisation: Kadiri 600, Bello 600; total 7,500 / Cr cash (assets sold) 7,500
Profit = 7,500 − 6,000 − 300 = 1,200, shared equally
(ii) Cash Book: Dr balance b/d 1,000, realisation 7,500 = 8,500 / Cr realisation expenses 300, creditors 2,000, Kadiri 3,100, Bello 3,100 = 8,500
(iii) Capital Accounts (Kadiri | Bello): Cr balance b/d 2,500 | 2,500, realisation profit 600 | 600 = 3,100 | 3,100 / Dr cash 3,100 | 3,100
(iv) Creditors Account: Dr cash 2,000 / Cr balance b/d 2,000
Cash is not taken to the realisation account; it is used to pay creditors and expenses first, then the partners.