Question

Pass necessary journal entries for the following transactions on dissolution of the partnership firm of Preeti, Varsha and Kamala after various assets (Other than cash and third party liabilities have been transferred to Realisation Account:

1. There were 100 shares of ₹ 10 each in Star Ltd. acquired at a cost of ₹ 2,00,000 which had been written off completely from the books. These shares were valued at ₹ 2,400 each and divided among the partners in their profit sharing ratio.
2. Land and Building of the book value of ₹ 40,00,000 was sold for ₹ 60,00,000 through a broker who charged 5% commission.
3. The firm had stock of ₹ 2,00,000. 40% of this stock was taken over by a creditor of ₹ 1,00,000 in full settlement of his claim. The remaining stock was sold at a loss of 10%.
4. Debtors of ₹ 3,50,000 were sold to a debt collection agency who charged a commission of ₹ 25,000.

Answer 1

Journal Entries on Dissolution
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	Preeti’s Capital A/c Dr.		80,000	—
	Varsha’s Capital A/c Dr.		80,000	—
	Kamala’s Capital A/c Dr.		80,000	—
	To Realisation A/c		—	2,40,000
	(Being unrecorded shares taken over by partners in their profit-sharing ratio)
	Bank A/c Dr.		60,00,000	—
	To Realisation A/c		—	60,00,000
	(Being Land and Building sold)
	Realisation A/c Dr.		3,00,000	—
	To Bank A/c		—	3,00,000
	(Being broker’s commission @ 5% on ₹ 60,00,000 paid)
	No Entry		—	—
	(40% stock taken over by creditor in full settlement of his claim)
	Bank A/c Dr.		1,08,000	—
	To Realisation A/c		—	1,08,000
	(Being remaining stock of ₹ 1,20,000 sold at 10% loss)
	Bank A/c Dr.		3,50,000	—
	To Realisation A/c		—	3,50,000
	(Being debtors sold to debt collection agency)
	Realisation A/c Dr.		25,000	—
	To Bank A/c		—	25,000
	(Being commission charged by debt collection agency paid)