Question

ABC & Co. had 3 partners: Alok, Bhavya, and Chirag, sharing profits in 4:3:3. The firm dissolved on 31 March 2024. Assets worth ₹9,00,000 were realized at 80%, creditors of ₹70,000 were paid, and an unrecorded liability of ₹20,000 was settled for ₹15,000. Realization expenses of ₹25,000 were borne by Alok.
Find the amount realized from assets.
What journal entry is made for realization expenses paid by Alok?
The unrecorded liability settled at a lesser value causes:

Hint:

In partnership dissolution, realization expenses and savings from unrecorded liabilities are shared among the partners based on their profit-sharing ratio.

Answer 1

Q1: Amount Realized from Assets 
The assets of ₹9,00,000 were realized at 80%. Thus, the amount realized from assets is: \[ \text{Amount realized} = 9,00,000 \times 0.80 = ₹7,20,000 \] So, the amount realized from assets is ₹7,20,000. 
Q2: Journal Entry for Realization Expenses Paid by Alok 
The realization expenses of ₹25,000 were borne by Alok. The journal entry for this will be: \[ \text{Realization Expenses Account} \quad Dr. \quad ₹25,000 \text{To Alok’s Capital Account} \quad ₹25,000 \] This entry shows that Alok is bearing the entire cost of the realization expenses, so it is debited to the realization expenses account, and Alok’s capital account is credited. 
Q3: The Unrecorded Liability Settled at Lesser Value Causes 
The unrecorded liability of ₹20,000 was settled for ₹15,000, resulting in a saving of ₹5,000. This saving is credited to the partners in their profit-sharing ratio of 4:3:3. The journal entry for settling the creditors will be: \[ \text{Creditors Account} \quad Dr. \quad ₹15,000 \text{To Realisation Account} \quad ₹15,000 \] Then, the saving of ₹5,000 is credited to the partners' capital accounts based on the profit-sharing ratio (4:3:3):

- Alok’s share: \( 5,000 \times \frac{4}{10} = ₹2,000 \) 
- Bhavya’s share: \( 5,000 \times \frac{3}{10} = ₹1,500 \) 
- Chirag’s share: \( 5,000 \times \frac{3}{10} = ₹1,500 \) The journal entry for this is: \[ \text{To Alok’s Capital Account} \quad ₹2,000 \text{To Bhavya’s Capital Account} \quad ₹1,500 \text{To Chirag’s Capital Account} \quad ₹1,500 \]