Kalu and Musa decided to dissolve their partnership on 31st December 2022. They shared profit or loss in the ratio of 2:3 respectively. The balance sheet before dissolution was as follows: You are required to prepare: (a) Realization Account; (b) Partners' Capital Account; (c) Bank Account.

Here are the required accounts for the dissolution of the partnership: a) Realization Account Step 1: Transfer all assets (excluding bank/cash) to the debit side of the Realization Account at their book values. Motor vehicle: N 720,000 Machinery: N 450,000 Premises: N 330,000 Stock: N 600,000 Debtors: N 300,000 Step 2: Transfer external liabilities (Creditors) to the credit side of the Realization Account at their book value. Creditors: N 300,000 Step 3: Record the realization of assets on the credit side. Motor vehicle: N 630,000 Machinery: N 600,000 Stock: N 300,000 Debtors: N 225,000 Total cash realized = N 630,000 + N 600,000 + N 300,000 + N 225,000 = N 1,755,000 Step 4: Record assets taken over by partners on the credit side. Kalu (Premises): N 150,000 Musa (Premises): N 135,000 Step 5: Record the payment of creditors and dissolution expenses on the debit side. Creditors paid: N 240,000 Dissolution cost: N 90,000 Step 6: Calculate the profit or loss on realization and distribute it to partners' capital accounts in their profit-sharing ratio (2:3). Total Debits = (720,000 + 450,000 + 330,000 + 600,000 + 300,000) + 240,000 + 90,000 = N 2,730,000 Total Credits = 300,000 + 1,755,000 + 150,000 + 135,000 = N 2,340,000 Loss on Realization = N 2,730,000 - N 2,340,000 = N 390,000 Kalu's share of loss = N 390,000 × (2)/(5) = N 156,000 Musa's share of loss = N 390,000 × (3)/(5) = N 234,000 |l|r|l|r| Realization Account & N & & N \\ To Motor vehicle & 720,000 & By Creditors & 300,000 \\ To Machinery & 450,000 & By Bank (Assets realized) & 1,755,000 \\ To Premises & 330,000 & By Kalu's Capital A/c (Premises) & 150,000 \\ To Stock & 600,000 & By Musa's Capital A/c (Premises) & 135,000 \\ To Debtors & 300,000 & By Kalu's Capital A/c (Loss) & 156,000 \\ To Bank (Creditors paid) & 240,000 & By Musa's Capital A/c (Loss) & 234,000 \\ To Bank (Dissolution expenses) & 90,000 & & \\ Total & 2,730,000 & Total & 2,730,000 \\ b) Partners' Capital Account Step 1: Bring down the opening balances of Capital and Current Accounts to the credit side. Kalu: Capital N 750,000, Current N 360,000 Musa: Capital N 675,000, Current N 195,000 Step 2: Debit partners for assets taken over and their share of realization loss. Kalu (Premises): N 150,000 Musa (Premises): N 135,000 Kalu (Loss): N 156,000 Musa (Loss): N 234,000 Step 3: Calculate the final payment to each partner (balancing figure) and transfer to the Bank Account. Kalu's Credit = 750,000 + 360,000 = N 1,110,000 Kalu's Debit = 150,000 + 156,000 = N 306,000 Kalu's final payment = 1,110,000 - 306,000 = N 804,000 Musa's Credit = 675,000 + 195,000 = N 870,000 Musa's Debit = 135,000 + 234,000 = N 369,000 Musa's final payment = 870,000 - 369,000 = N 501,000 |l|r|r|l|r|r| Partners' Capital Account & Kalu (N) & Musa (N) & & Kalu (N) & Musa (N) \\ To Realization A/c (Premises) & 150,000 & 135,000 & By Balance b/d (Capital) & 750,000 & 675,000 \\ To Realization A/c (Loss) & 156,000 & 234,000 & By Balance b/d (Current) & 360,000 & 195,000 \\ To Bank A/c (Final payment) & 804,000 & 501,000 & & & \\ Total & 1,110,000 & 870,000 & Total & 1,110,000 & 870,000 \\ c) Bank Account Step 1: Bring down the opening bank overdraft balance to the credit side. Bank overdraft: N 120,000 Step 2: Debit the account for cash received from asset realization. Realization A/c (Assets realized): N 1,755,000 Step 3: Credit the account for payments made for creditors, dissolution expenses, and final payments to partners. Realization A/c (Creditors paid): N 240,000 Realization A/c (Dissolution expenses): N 90,000 Kalu's Capital A/c (Final payment): N 804,000 Musa's Capital A/c (Final payment): N 501,000 Step 4: The Bank Account should balance, indicating the dissolution process is complete. |l|r|l|r| Bank Account & N & & N \\ To Realization A/c (Assets realized) & 1,755,000 & By Balance b/d (Overdraft) & 120,000 \\ & & By Realization A/c (Creditors paid) & 240,000 \\ & & By Realization A/c (Dissolution expenses) & 90,000 \\ & & By Kalu's Capital A/c (Final payment) & 804,000 \\ & & By Musa's Capital A/c (Final payment) & 501,000 \\ Total & 1,755,000 & Total & 1,755,000 \\ That's 5 down. You've completed all the questions for today!