hip as James was personally insolvent. The partnerships’ post- closing trial balance at that date was as follows: Account details Dr Cr Capital: Gerald James Larry 60 000 12 000 35 000 Current accounts: Gerald Larry 800 400 General reserve 8 000 8% Mortgage Loan 21 600 Accounts payable 17 600 Goodwill 30 000 Land and buildings at cost 44 000 Motor vehicles at cost 24 000 Accumulated depreciation: motor vehicles 10 000 Office equipment 8 000 Accumulated depreciation: office equipment 3 200 Inventory 20 100 Accounts receivable 6 000 Bank 36 500 168 600 168 600
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.
Gerald, James and Larry were in
|
Account details |
Dr |
Cr |
|
Capital: Gerald James Larry |
|
60 000 12 000 35 000 |
|
Current accounts: Gerald Larry |
|
800 400 |
|
General reserve |
|
8 000 |
|
8% Mortgage Loan |
|
21 600 |
|
Accounts payable |
|
17 600 |
|
|
30 000 |
|
|
Land and buildings at cost |
44 000 |
|
|
Motor vehicles at cost |
24 000 |
|
|
|
|
10 000 |
|
Office equipment |
8 000 |
|
|
Accumulated depreciation: office equipment |
|
3 200 |
|
Inventory |
20 100 |
|
|
|
6 000 |
|
|
Bank |
36 500 |
|
|
|
168 600 |
168 600 |
|
|
|
|
The realization transactions are summarized as follows:
- Land and building was taken over jointly by Gerald and Larry in the ratio 1:1 for N$ 46 000.
- Office equipment was sold for N$ 7 000 cash.
- Only 70% of accounts receivable was realized and the balance is irrecoverable.
- Inventory was sold by public auction for N$ 12 700 cash.
- Paid auctioneer’s fee of N$ 200.
- One of the motor vehicles with cost N$ 12 000 and accumulated depreciation of N$ 5 000 was sold for N$ 5 000 cash and the second vehicle was taken over by Larry for N$ 6 000.
- Paid accounts payable N$ 16 800 in full settlement of their claims.
- Paid Larry N$ 4000 in respect of his loan.
- Paid N$ 21 600 in respect of the mortgage loan.
James is insolvent and unable to repay any amounts on his final capital deficit to the partnership. The deficit will be borne by Gerald and Larry in the ratio 2:3
REQUIRED:
Prepare the following ledger accounts with respect to the dissolution of the partnership:
- Bank account
- Realization account
- Partners’ capital account:
Step by step
Solved in 4 steps
