Question

A, B, and C were in a partnership and shared profits in the ratio of 2:1:1. Upon dissolution, their balance sheet indicated the following financial position:

Liabilities:

Creditors: Rs. 40,000
Bills payable: Rs. 10,000
A's Loan: Rs. 20,000
Mrs. A's Loan: Rs. 16,000
Workmen Compensation Reserve: Rs. 20,000
Assets:

Fixed Assets: Rs. 50,000
Stock: Rs. 60,000
Debtors: Rs. 30,000 (Less Provision of Rs. 2,000)
Furniture: Rs. 20,000
Goodwill: Rs. 18,000
Cash at bank: Rs. 10,000
Capital:

A: Rs. 40,000
B: Rs. 20,000
C: Rs. 20,000
The following additional information is given:

i. A agreed to take over the furniture at 20% less than the book value.
ii. Fixed assets realized Rs. 32,000, and stock realized Rs. 55,000.
iii. Bad debts amounted to Rs. 5,000.
iv. Expenses of realization were Rs. 3,000.
v. Creditors were paid at a discount of 5%.
vi. There was a claim of Rs. 6,400 for damages against the firm, which had to be paid

Answer 1

A T-account for a bank separates assets on the left side from liabilities on the right, with net worth included on liabilities to balance the account. The bank's net worth is the difference between assets and liabilities, and shows the financial health of the bank.

Step-by-step explanation:

The T-account represents a simplified balance sheet for a bank, showing the relationship between the bank's assets and liabilities. The assets include reserves, government bonds, and loans made by the bank. Liabilities consist of the deposits held at the bank. The net worth is calculated by subtracting the total liabilities from the total assets and is included on the liabilities side to balance the T-account. A T-account is essential for visualizing the financial health of a bank, as it helps in understanding how assets are financed by liabilities and equity.

Bank's T-account Balance Sheet

• Assets:
  • Reserves: $50
  • Government Bonds: $70
  • Loans: $500
• Liabilities:
  • Deposits: $400

Net Worth: Calculated as Assets ($620) - Liabilities ($400) = $220