Accountancy Part ADissolution of Partnership Firm

Calculate amount paid to creditors.

Based on following Balance Sheet of Tarnav and Manav as at 31^st March 2022, answer question:

Balance Sheet as at 31^st March 2022

Liabilities	₹	Assets	₹
Sundry Creditors Sanjay’s Loan General Reserve Workman Compensation Reserve Provision For Doubtful Debts Capital : Tarnav 10,000 Manav 10,000	30,000 5,000 11,000 12,000 2,000 20,000	Cash at Bank Stock in Trade Debtors Plant Goodwill	13,000 5,000 20,000 30,000 12,000
	80,000		80,000

On that date the firm was dissolved on the following terms:

(i) Tarnav promised to pay Sanjay's loan and took over stock in trade at ₹4,000.
(ii) Creditors, payable after one month, were paid immediately at a discount of 6% per annum.
(iii) Debtors of ₹1,000 proved bad, plant realised 130%.
(iv) Expenses on Realisation were ₹1,500 borne and paid by Manav.
(v) Manav took over an old computer completely written off from the book at ₹500.

Calculate amount paid to creditors.

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → ₹29,850

The creditors were due only after one month but were paid at once, so they allowed a discount of 6% per annum for one month, the period by which payment was advanced.

Discount = ₹30,000 × 6/100 × 1/12 = ₹150
Amount paid to creditors = ₹30,000 − ₹150 = ₹29,850

Note: Taking 6% of the full amount (₹1,800) treats it as a flat discount and gives ₹28,200; the discount is for paying one month early, so it is worked out for one month only.

Based on following Balance Sheet of Tarnav and Manav as at 31^st March 2022, answer question:

Balance Sheet as at 31^st March 2022

Liabilities	₹	Assets	₹
Sundry Creditors Sanjay’s Loan General Reserve Workman Compensation Reserve Provision For Doubtful Debts Capital : Tarnav 10,000 Manav 10,000	30,000 5,000 11,000 12,000 2,000 20,000	Cash at Bank Stock in Trade Debtors Plant Goodwill	13,000 5,000 20,000 30,000 12,000
	80,000		80,000

On that date the firm was dissolved on the following terms:

Calculate amount paid to creditors.

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → ₹29,850

The creditors were due only after one month but were paid at once, so they allowed a discount of 6% per annum for one month, the period by which payment was advanced.

Discount = ₹30,000 × 6/100 × 1/12 = ₹150
Amount paid to creditors = ₹30,000 − ₹150 = ₹29,850

Note: Taking 6% of the full amount (₹1,800) treats it as a flat discount and gives ₹28,200; the discount is for paying one month early, so it is worked out for one month only.