Realisation A/ c
Particulars Amount Particulars Amount
To Land and building
To Furniture and fixtures
To Stock
To Debtors
To Cash A/ c (expenses on
Dissolution)
To Cash A/ c (creditors
36,000 + 18,000)
To Cash A/ c (Mortgage loan)
2,46,000
65,000
1,00,000
72,500
7,800
54,000
1,10,000
By Sundry creditors
By Mortgage loan
By Cash account –
Land and building
Furniture & fixtures
Stock
Debtors
By Partners' capital
accounts (Loss 4:3:2:1)
P = 40,120
Q = 30,090
R = 20,060
S = 10,030
36,000
1,10,000
2,30,000
42,000
72,000
65,000
1,00,300
6,55,300 6,55,300
Partner's Capital A/ c
Particulars P Q R S Particulars P Q R S
To Bal b/d 25,000 18,000 By bal b/d 1,68,
000
1,08,
000
To
Realization
A/c (Loss)
40,
120
30,
090
20,
060
10,
030
Reserve 38,
000
28,
500
19,
000
9,
500
To R's Capital
A/c
(Deficiency)
12,
636
8,424 By Capital
Reserve
10,
000
7,
500
5,
000
2,
500
To Cash A/c 2,03, 1,35, By Cash A/c 40, 30, 10,
364 576 (realization
loss) -
notional
entry
120 090 030
By P's
Capital A/c
12,
636
By Q's
Capital A/c
8,
424
By Cash
A/c
6,
000
Total 2,56,
120
1,74,
090
45,
060
28,
030
Total 2,56,
120
1,74,
090
45,
060
28,
030
Cash A/ c
Particulars Amount Particulars Amount
To Balance b/ d
To Realization A/ c:
Land and building
Furniture & fixtures
Stock
Debtors
To P, Q, S's capital A/ cs
(40, 120+ 30,090+ 10,030)
To S's capital A/ c
15,500
2,30,000
42,000
72,000
65,000
80,240
6,000
By Realization A/ c:
Expenses on dissolution
Creditors
(36;ooo+ 18,000)
Mortgage loan
By P's capital A/ c
By Q's capital A/ c
7,800
54,000
1,10,000
2,03,364
1,35,576
5,10,740 5,10,740
Working Note:
As per Garner Vs. Murray rule, solvent partners have to bear loss of insolvent partner in their
capital ratio.
Computation of Capital Ratio (of Solvent Partners)
P Q S
Opening capital
Add:. General reserve
1,68,000
38,000
1,08,000
28,500
(18,000)
9,500
Capital reserve 10,000 7,500 2,500
2,16,000 1,44,000 (6,000)
Though S is a solvent partner yet he cannot be called upon to bear loss on account of
insolvency of R because his capital account has a debit balance.
Therefore, capital ratio of P & Q = 216: 144 = 3: 2
Deficiency of R = {(25,000 + 20,060)- (19,000 + 5,000)} = 45,060 - 24,000= 21,060.
Deficiency of R will be shared by P & Q in the capital ratio of 3: 2 i.e.
P = 21,060 X 3/5 = 12,636
Q = 21,060 X 2/5 = 8,424