Question

Simar, Raja and Rita were partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1. The firm was dissolved on 31st March, 2019. After the transfer of assets (other than cash) and external liabilities to the Realisation Account, the following transactions took place:

1. A debtor whose debt of 90,000 had been written off as bad, paid 88,000 in full settlement.
2. Creditors to whom ₹ 1,21,000 were due to be paid, accepted stock at 71,000 and the balance was paid to them by a cheque.
3. Raja had given a loan to the firm of ₹ 18,000. He was paid ₹ 17,000 in full settlement of his loan.
4. Investments were ₹ 53,000 out of which investments of ₹ 43,000 were taken by Simar at ₹ 52,000 and the balance of the investments were sold for ₹ 12,000.
5. Expenses on dissolution amounted to ₹ 19,000 and the same were paid by the firm.
6. Profit on dissolution amounted to 30,000.

Pass the necessary Journal entries for the above transactions in the books of the firm.

Hints:

1. Dr. Bank/Cash A/c and Cr. Realisation A/c by ₹ 88,000.
2. Dr. Realisation A/c and Cr. Bank A/c by ₹ 50,000 each.
3. Dr. Raja’s Loan A/c by ₹ 18,000; Cr. Bank/Cash A/c by ₹ 17,000 and Realisation A/c by ₹ 1,000. Alternatively:
   1. Dr. Raja’s Loan A/c and Cr. Bank/Cash A/c by ₹ 17,000 each.
   2. Dr. Raja’s Loan A/cand Cr. Realisation A/c by ₹ 1,000 each.
4. Dr. Simar’s Capital A/c by ₹ 52,000 and Cash/Bank A/c by ₹ 12,000; Cr. Realisation A/c by ₹ 64,000.
5. Dr. Realisation A/c and Cr. Cash/Bank A/c by ₹ 19,000 each.
6. Dr. Realisation A/c by ₹ 30,000; Cr. Simar’s Capital A/c by ₹ 12;000; Raja’s Capital A/c by ₹ 12,000 and Rita’s Capital A/c by ₹ 6,000.

Answer 1

Journal Entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
(a)	Bank/Cash A/c   ...Dr.		88,000
	To Realisation A/c		-	88,000
	(Being the recovery of bad debts previously written off received in cash)
(b)	Realisation A/c   ...Dr.		50,000	-
	To Bank/Cash A/c		-	50,000
	(Being the remaining balance of ₹ 50,000 paid to creditors by cheque after a stock adjustment of ₹ 71,000)
(c)	Raja’s Loan A/c   ...Dr.		18,000	-
	To Bank/Cash A/c		-	17,000
	To Realisation A/c		-	1,000
	(Being Raja’s loan settled in full at a gain of ₹ 1,000 transferred to the Realisation account)
(d)	Simar’s Capital A/c   ...Dr.		52,000	-
	Bank/Cash A/c   ...Dr.		12,000	-
	To Realisation A/c		-	64,000
	(Being part of investments taken over by Simar at ₹ 52,000 and the remaining balance sold for ₹ 12,000)
(e)	Realisation A/c   ...Dr.		19,000	-
	To Bank/Cash A/c		-	19,000
	(Being dissolution expenses paid directly by the firm)
(f)	Realisation A/c   ...Dr.		30,000	-
	To Simar’s Capital A/c		-	12,000
	To Raja’s Capital A/c		-	12,000
	To Rita’s Capital A/c		-	6,000
	(Being profit on dissolution distributed among the partners in their profit-sharing ratio of 2 : 2 : 1)