Question

Adiraj and Karan were partners in a firm sharing profits and losses in the ratio 3 : 2. On 31st March, 2018 the firm was dissolved. After the transfer of assets (other than cash in hand and at bank) and third party liabilities to the Realisation Account, the following information was provided:

1. Furniture of ₹ 70,000 was sold for ₹ 68,000 by auction and auctioneer’s commission amounted to ₹ 2,000.
2. Adiraj’s loan amounting to ₹ 35,000 was settled at ₹ 37,500.
3. Out of the stock of ₹ 80,000, Karan took over 50% of the stock at a discount of 20% while the remaining stock was sold off at a profit of 30% on cost.
4. Realization expenses amounted to ₹ 2,000 which were paid by Adiraj.

Pass the necessary journal entries for the above transactions on the dissolution of the firm.

Answer 1

Journal Entries in the books of firm
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
31-03-2018	Bank A/c Dr.		66,000	—
	To Realisation A/c		—	66,000
	(Being furniture sold for ₹ 68,000 and auctioneer’s commission ₹ 2,000 deducted from sale proceeds)
31-03-2018	Adiraj’s Loan A/c Dr.		35,000	—
	Realisation A/c Dr.		2,500	—
	To Bank A/c		—	37,500
	(Being Adiraj’s loan of ₹ 35,000 settled for ₹ 37,500)
31-03-2018	Karan’s Capital A/c Dr.		32,000	—
	Bank A/c Dr.		52,000	—
	To Realisation A/c		—	84,000
	(Being 50% stock taken over by Karan at 20% discount and remaining stock sold at 30% profit on cost)
31-03-2018	Realisation A/c Dr.		2,000	—
	To Adiraj’s Capital A/c		—	2,000
	(Being realisation expenses paid by Adiraj)

Working Note:

Furniture net proceeds = ₹ 68,000 − ₹ 2,000 = ₹ 66,000

Stock taken over by Karan = ₹ 40,000 − 20% = ₹ 32,000

Remaining stock sold = ₹ 40,000 + 30% = ₹ 52,000

Total credited to Realisation A/c = ₹ 32,000 + ₹ 52,000 = ₹ 84,000