Page 235 - VIRANSH COACHING CLASSES

Working Note :
1. Machinery - 50,000

50% ` 25,000 (Nerle) 50% ` 25,000 (Realised)
(less) 10% ` 2,500 (Discount) (less) ` 4,000 (Loss)
` 22,500 ` 21,000

2. Stock - 30,000

1 3
4 ` 7,500 (Nerle) 4 ` 22,500 (Realised)
(less) 20% ` 1,500 (Discount) (Add) 10% ` 2,250 (Profit)

` 6,000 ` 24,750
3. Creditors paid at 5% Discount. 4. Total Debtors (B/S) ` 44,000
5
= ` 32,000 × 100 = ` 1,600 Less : Patil taken over ` 20,000

= ` 32,000 − 1,600 = ` 30,400 Remaining Balance ` 24,000
95% Debtors Realised ` 22,800
6.5 B) Dissolution Under Insolvency Situation :
Insolvency - In legal terminology, the situation where the liabilities of a person or firm exceeds
its assets. In practice however insolvency is the situation where an individual or a firm cannot raise
enough cash to meet its obligations, or to pay debts as they become due for payment.
At the time of dissolution if the Partner’s Capital Account shows a debit balance after making
adjustments he is to bring cash in order to settle his account. If he is unable to clear his debit balance
either wholly or in part the unrecoverable portion of the said partner must be borne by the solvent
partners.

6.5 C) Some Important Concepts :
A. Solvent Partner : “A Partner whose assets are more than his liabilities”
A person is said to be solvent, when he is able to pay off his liabilities out of his assets.
A solvent partner means a partner who is able to meet his financial obligations.
B. Insolvent Partner :
“Insolvent Partner means a partner whose Liabilities are more than his Assets.”
“A person is said to be insolvent when he is unable to satisfy his liabilities out of his assets”.
C. Capital Deficiency : Capital deficiency means that one or more partner has a debit balance in
his capital account at the point of final cash distribution. As per Partnership Act 1932 The lia-
bility of partners in a firm is unlimited as well as joint and several, so when a partners becomes
insolvent his private property is acquired and sold out. If he is unable to pay his dues to firm his
deficiency is borne by solvent partners in their profit sharing ratio.

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