Question

Ritesh and Farhan are partners in a firm sharing profits and losses in the ratio of 3 : 1. They decided to dissolve their firm on 31st March, 2021.

You are required to pass the necessary journal entries for the following, after the realisable assets and outside liabilities have been transferred to the Realisation Account.

1. Creditors of ₹ 20,000 were paid the amount due to them, by giving them an unrecorded asset worth ₹ 4,000 and the balance in cash.
2. Ritesh’s Loan of ₹ 1,00,000 was settled by giving him an unrecorded asset of ₹ 50,000 at ₹ 60,000 and the balance in cash.
3. Bills Payable of ₹ 30,000 were due to be paid on 30th April, 2021. They were paid on the date of dissolution of the firm at a rebate of 5% per annum.
4. Realisation expenses of ₹ 2,000 were to be borne by Farhan. These were paid by the firm on his behalf.

Answer 1

Journal Entry
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
(a)	Realisation A/c    ...Dr.		16,000	-
	To Bank A/c (₹ 20,000 – ₹ 4,000)		-	16,000
	(Being Creditors settled)
(b)	Ritesh’s Loan A/c    ...Dr.		1,00,000	-
	To Realisation A/c		-	60,000
	To Bank A/c		-	40,000
	(Being Ritesh’s loan settled)
(c)	Realisation A/c       ...Dr.		29,875	-
	To Bank A/c		-	29,875
	(Being Bills Payable settled)
(d)	Farhan’s Capital A/c    ...Dr.		2,000	-
	To Bank A/c		-	2,000
	(Being Realization expenses paid by the firm on behalf of Farhan)