Question

Pass the necessary journal entries for the following transactions on the dissolution of a partnership firm of Vibha and Ajit after various assets (other than cash) and external liabilities have been transferred to Realisation Account:}
Creditors worth ₹ 46,000 accepted ₹ 9,000 cash and furniture of ₹ 32,000 in full settlement of their claim.

The firm had stock of ₹ 20,000. Ajit took over 40% of the stock at a discount of 10% while the remaining stock was sold for ₹ 18,000.

Vibha was appointed to look after dissolution work for which she was allowed a remuneration of ₹ 16,000. Vibha agreed to bear the dissolution expenses. Actual dissolution expenses ₹ 15,000 were paid by Vibha.

Ajit’s loan of ₹ 45,000 was settled at ₹ 42,000.

A machine which was not recorded in the books was taken over by Vibha at ₹ 23,000, whereas its expected value was ₹ 28,000.

The firm had a debit balance of ₹ 20,000 in the Profit and Loss Account on the date of dissolution.

Hint:

In dissolution, assets/liabilities are transferred to the Realisation Account. Take special care when partners take over assets, or any expense arrangements are made.

Answer 1

Particulars	L.F.	Amount (₹)	Amount (₹)
Creditors A/c Dr.		46,000
To Cash A/c			9,000
To Furniture A/c			32,000
To Realisation A/c			5,000
Being creditors settled by paying cash, giving furniture and discount
Ajit’s Capital A/c Dr.		7,200
To Realisation A/c			7,200
Cash A/c Dr.		18,000
To Realisation A/c			18,000
Being Ajit paid ₹7,200 against ₹8,000 due after 10% discount; asset realised ₹18,000
Realisation A/c Dr.		16,000
To Vibha’s Capital A/c			16,000
Being remuneration allowed to Vibha
Ajit’s Loan A/c Dr.		45,000
To Cash A/c			42,000
To Realisation A/c			3,000
Being Ajit’s loan settled by part payment and discount
Vibha’s Capital A/c Dr.		23,000
To Realisation A/c			23,000
Being loss transferred to Vibha’s capital
Partners’ Capital A/cs Dr.		20,000
To Profit and Loss A/c			20,000
Being net loss transferred to partners' capital accounts