Question

Give journal entries in each of the following alternative cases on the dissolution of a firm:

1. Realisation expenses paid by X on behalf of the firm.
2. Realisation expenses paid by the firm ₹ 1,000. However, the expenses were to be borne by partner X for which he was to be given a commission of 5% on net cash realised on dissolution. Cash realised from assets was ₹ 2,00,000 and cash paid for liabilities was ₹ 40,000.
3. General Reserve appearing in the balance sheet was ₹ 20,000.
4. Sundry Creditors amounted to ₹ 15,000. These were paid at a discount of 2%.

Answer 1

Journal Entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
(i)	Realisation A/c    ...Dr.		-
	To X’s Capital A/c			-
	(Being Realisation expenses paid by X on behalf of the firm)
(ii)	X’s Capital A/c   ...Dr.		1,000	-
	To Bank A/c		-	1,000
	(Being Payment of Realisation expenses by the firm on behalf of the partner)
	Bank A/c   ...Dr.		2,00,000	-
	To Realisation A/c		-	2,00,000
	(Being Assets realised)
	Realisation A/c   ...Dr.		40,000	-
	To Bank A/c		-	40,000
	(Being liabilities paid off)
	Realisation A/c   ...Dr.		8,000	-
	To X’s Capital A/c		-	8,000
	(Being 5% commision payable to X on ₹ 1,60,000 i.e., on ₹ 2,00,000 less ₹ 40,000)
(iii)	General reserve A/c   ...Dr.		20,000	-
	To Partner’s Capital A/c		-	20,000
	(Being General reserve credited to Partner’s Capital accounts in profit sharing ratio)
(iv)	Realisation A/c   ...Dr.		14,700	-
	To Bank A/c		-	14,700
	(Being Payment of creditors amounting to ₹ 15,000 at 2% discount)