Question

On dissolution of partnership firm out of total debtors of Rs 2,50,000, Rs 10,000 became bad and the rest realised 70%, in the given case Bank A/c will be debited by :

• A. Rs 1,75,000
• B. Rs 1,68,000
• C. Rs 1,62,000
• D. Rs 1,68,000

Hint:

Always deduct bad debts before calculating the amount realised from debtors during dissolution.

Answer 1

The Correct Option is B

Calculating Realization from Debtors on Dissolution:
This requires accounting for bad debts and then calculating the cash realised from the remaining debtors.
Step 1: Determine the Value of Debtors Available for Realisation Total Debtors = Rs2,50,000
Bad Debts = Rs10,000
Good Debtors = Total Debtors - Bad Debts
Good Debtors = Rs2,50,000 - Rs10,000 = Rs2,40,000

Step 2: Calculate Amount Realised from Good Debtors Percentage Realised = 70%
Amount Realised = Good Debtors * Percentage Realised
Amount Realised = Rs2,40,000 * 70% = Rs1,68,000

Journal Entry
Bank a/c Dr. (Rs1,68,000)
To Realization A/c (Rs1,68,000)
Therefore, Bank A/c will be debited by Rs1,68,000 which represents the cash inflow.