Page 244 - VIRANSH COACHING CLASSES

Dr. Partners’ Capital Account Cr.
Particulars Narendra Devendra Mahendra Particulars Narendra Devendra Mahendra
(`) (`) (`) (`) (`) (`)
To Realisation A/c 67,500 67,500 45,000 By Balance b/d 20,000 80,000 40,000
(Loss on By Bank A/c 10,000
realisation) By Devendra’s
Capital A/c 28,500
To Realisation A/c 26,000 By Mahendra’s
Capital A/c 19,000
To Narendra’s By Devendra’s
Capital A/c 28,500 19,000 Capital A/c 14,000

To Mahendra’s By Bank A/c 56,000
Capital A/c 14,000

67,500 1,36,000 64,000 67,500 1,36,000 64,000

Dr. Bank Account Cr.
Particulars Amount ` Particulars Amount `
To Balance b/d 10,000 By Realisation A/c 2,00,000
To Realisation A/c 1,26,000 By Realisation A/c 2,000
To Mahendra’s Capital A/c 10,000
To Devendra’s Capital A/c 56,000
2,02,000 2,02,000

Working Note :
1. Deficiency of Nerandra - Capital Deficiency of Narendra ` 47,500 distributed among Deven-
dra and Mahendra in their profit sharing ratio i.e. 3:2
Devendra ` 47,500 × 3/5 = ` 28,500

Mahendra ` 47,500 × 2/5 = ` 19,000
2. Deficiency of Mahendra - Because of payment of Narendra’s Capital Deficiency, Mahendra
become insolvent therefore his Capital Deficiency is borne by Devendra ` 14,000.

6.6 B) (When All Partners Are Insolvent)
If all the partners are insolvent, then the third party liabilities cannot be expected to be paid
in full. All the cash available, together with whatever can be recovered from the private estate of
the partners, will be paid to the third party liabilities after the expenses of realisation are met. The
Realisation Account should be prepared as usual but third party liabilities should not be transferred
to Realisation Account nor will payment to third party liabilities be debited to this account. The loss
on realisation should be transferred proportionately to the Capital Account of partners in the profit
sharing ratio. The available cash should then be paid to the third party liabilities in their liability
ratio. The amount remaining unpaid should be transferred to Deficiency Account. The final balances
of Partners’ Capital Accounts should also be transferred to Deficiency Account. Thus the books will
be closed.

235