Question

Pass the necessary Journal entries for settlement of loan by partner at the time of dissolution of firm under each of the following cases:

Case 1. Loan from Shiv (a partner) ₹ 1,00,000 and balance in his Capital Account (Credit) ₹ 1,75,000.

Case 2. Loan from Shiv (a partner) ₹ 1,00,000 and balance in his Capital Account (Debit) ₹ 80,000.

Case 3. Loan from Shiv (a partner) ₹ 1,00,000 and balance in his Capital Account (Debit) ₹ 1,37,500.

Hints:

1. Dr. Loan from Shiv A/c and Cr. Bank A/c by ₹ 1,00,000.
   Note: Shiv’s Capital A/c has a credit balance, so the loan will be paid before payment of his capital.
2. Dr. Loan from Shiv A/c by ₹ 1,00,000 and Cr. Shiv’s Capital A/c by ₹ 80,000 and Bank A/c by ₹ 20,000.
3. Dr. Loan from Shiv A/c by ₹ 1,00,000 and Bank A/c by ₹ 37,500; Cr. Shiv’s Capital A/c by ₹ 1,37,500.

Answer 1

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Loan from Shiv A/c   ...Dr.		1,00,000
	To Bank A/c			1,00,000
	(Being partner’s loan paid off in cash)
2.	Loan from Shiv A/c   ...Dr.		1,00,000
	To Shiv’s Capital A/c			80,000
	To Bank A/c			20,000
	(Being loan adjusted against capital debit balance and the remainder paid)
3.	Loan from Shiv A/c   ...Dr.		1,00,000
	Bank A/c   ...Dr.		37,500
	To Shiv’s Capital A/c			1,37,500
	(Being loan adjusted and deficiency brought in by partner)