Question

Aman and Harsh, partners in a firm, dissolved their firm. Pass necessary Journal entries for the following after assets (other than Cash and Bank) and outside liabilities had been transferred to Realisation Account:

1. Furniture existed in the book at ₹ 50,000.Aman took 50% of the furniture at 10% discount.
2. Profit & Loss Account had credit balance of ₹ 15,000 on the date of dissolution.
3. Harsh’s loan of ₹ 6,000 was settled by paying ₹ 5,500.
4. Firm paid realisation expenses of ₹ 5,000 on behalf of Harsh, a partner.
5. There was a cheque for ₹ 1,200 under discount. The cheque was received from Soham who became insolvent, and a first and final dividend of 25% was received from his estate.
6. Creditors of ₹ 6,000, accepted stock of ₹ 5,000 at a discount of 5% and the balance in cash.

Hint: (a) Balance furniture of ₹ 25,000 will be realised at book value being a tangible asset.

Answer 1

Journal Entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
(a)
(i)	Aman’s Capital A/c   ...Dr.		22,500	-
	To Realisation A/c		-	22,500
	(Being 50% of the furniture taken over by Aman at a 10% discount: 25,000 − 2,500)
(ii)	Bank/Cash A/c   ...Dr.		25,000	-
	To Realisation A/c		-	25,000
	(Being the remaining 50% of the tangible furniture realised at full book value as per rule)
(b)	Profit & Loss A/c   ...Dr.		15,000	-
	To Aman’s Capital A/c		-	7,500
	To Harsh’s Capital A/c		-	7,500
	(Being accumulated profit distributed equally between the partners in 1 : 1 ratio)
(c)	Harsh’s Loan A/c   ...Dr.		6,000	-
	To Bank/Cash A/c		-	5,500
	To Realisation A/c		-	500
	(Being the partner’s loan settled at a discount, and gain transferred to the Realisation Account)
(d)	Harsh’s Capital A/c		5,000	-
	To Bank/Cash A/c		-	5,000
	(Being actual dissolution expenses paid by the firm on behalf of partner Harsh)
(e)
(i)	Realisation A/c   ...Dr.		1,200	-
	To Bank A/c		-	1,200
	(Being the discounted cheque dishonoured due to insolvency and paid by the firm in full)
(ii)	Bank/Cash A/c   ...Dr.		300	-
	To Realisation A/c		-	300
	(Being a 25% first and final dividend recovered from Soham’s estate: 25% of 1,200)
(f)	Realisation A/c    ...Dr.		1,250	-
	To Bank/Cash A/c		-	1,250
	(Being the remaining cash balance paid to creditors after a stock adjustment of ₹4,750 [5,000 - 5%])