Question

Dev, Bhudev and Shamdev were partners in a firm sharing profits equally. On 31st March, 2024, their firm was dissolved. On this date the bank account showed a credit balance of 10,000 and there was a debit balance of 15,000 in the cash account. All payments were settled by cheque. Ravi, a creditor of 2,000 was not having any bank account, therefore he was paid in cash. Afterwards the cash account was closed by depositing the balance of cash into the bank. The journal entry for closing cash account will be:

• A. Debit Cash A/c by 10,000 and Credit Bank account by 10,000
• B. Credit Cash A/c by 10,000 and Debit Bank account by 10,000
• C. Debit Bank A/c by 13,000 and Credit Cash account by 13,000
• D. Debit Cash A/c by 13,000 and Credit Bank account by 13,000

Hint:

When closing the cash account during dissolution, deposit the remaining cash (after all necessary payments) into the bank. Debit the receiving account (Bank) and credit the paying account (Cash).

Answer 1

The Correct Option is C

Step 1: Cash A/c shows debit balance = 15,000 
Step 2: Out of this, 2,000 was paid to Ravi in cash (since he had no bank account). 
Remaining cash balance = 15,000 - 2,000 = 13,000 
Step 3: This balance of 13,000 was deposited into the bank to close the cash account. 
Step 4: So, cash account (asset) is decreasing \(\Rightarrow \)Credit Cash A/c 
Bank account (asset) is increasing \(\Rightarrow\) Debit Bank A/c 
Bank A/c Dr. & 13,000 
To Cash A/c & 13,000