Question

Vasudha and Dewan were partners in a firm sharing profits and losses in the ratio of 2 : 3. The firm was dissolved on 31st March, 2019. After transfer of assets (Other than cash) and external liabilities to Realization Account, the following transactions took place:

1. Investments of the face value of ₹ 60,000 were sold in the open market for ₹ 63,000 for which a commission of ₹ 700 was paid to the broker.
2. Creditors worth ₹ 65,000 were settled by handing over the entire stock to them along with a payment of ₹ 23,000 by cheque.
3. There was old furniture which had been completely written off from the books of the firm. It was taken over by Vasudha at ₹ 2,000.
4. Dewan undertook to pay Ms. Dewan's loan of ₹ 45,000.
5. Dewan was appointed to look after the process of dissolution for which he was allowed a remuneration of ₹ 7,000. He agreed to bear the dissolution expenses. Actual expenses incurred by Dewan were ₹ 11,000, which were paid by the firm.
6. Loss on realisation amounted to ₹ 9,000.

Pass the necessary journal entries to record the above transactions in the books of the firm.

Answer 1

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
31-03-2019	Bank A/c Dr.		62,300	—
	To Realisation A/c		—	62,300
	(Being investments sold for ₹63,000 less broker’s commission ₹700)
31-03-2019	Realisation A/c Dr.		23,000	—
	To Bank A/c		—	23,000
	(Being creditors settled by handing over stock and paying balance by cheque)
31-03-2019	Vasudha’s Capital A/c Dr.		2,000	—
	To Realisation A/c		—	2,000
	(Being unrecorded furniture taken over by Vasudha)
31-03-2019	Realisation A/c Dr.		45,000	—
	To Dewan’s Capital A/c		—	45,000
	(Being Ms. Dewan’s loan taken over by Dewan)
31-03-2019	Realisation A/c Dr.		7,000	—
	To Dewan’s Capital A/c		—	7,000
	(Being remuneration allowed to Dewan for looking after dissolution)
31-03-2019	Dewan’s Capital A/c Dr.		11,000	—
	To Bank A/c		—	11,000
	(Being dissolution expenses borne by Dewan but paid by the firm)
31-03-2019	Vasudha’s Capital A/c Dr.		3,600	—
	Dewan’s Capital A/c Dr.		5,400	—
	To Realisation A/c		—	9,000
	(Being loss on realisation transferred to partners’ Capital Accounts in the ratio 2 : 3)

Working note:

Loss on Realisation:

Vasudha = ₹ 9,000 × `2/5` = ₹ 3,600

Dewan = ₹ 9,000 × `3/5` = ₹ 5,400