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C and D Were Partners in a Firm Sharing Profits in the Ratio of 3:2. on 28-2-2016 the Firm Was Dissolved. After Transferring Assets (Other than Cash) and Outsiders' Liabilities to Realization Account You Are Given the Following Information - Accountancy

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C and D were partners in a firm sharing profits in the ratio of 3:2. On 28-2-2016 the firm was dissolved. After transferring assets (other than cash) and outsiders' liabilities to realization account you are given the following information :

(a) A creditor for Rs 2 00,000 accepted building of Rs 2,80,000 at Rs 2,20,000 and paid the firm Rs 20,000.

(b) A second creditor for Rs 75,000 accepted furniture at Rs 60,000 in full settlement of his claim.

(c) A third creditor amounting to Rs 80,000 accepted Rs 20,000 in cash and investments of the book value of Rs 65,000 in full settlement of his claim.

(d) Loss on dissolution was Rs 7,500. Pass necessary journal entries for the above transactions in the books of the firm assuming that all payments were made by cheque.

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Solution

In the books of ……
Journal

Date Particulars L.F.

Dr.

Rs

Cr.

Rs

(a)

 

 

 

(b)

 

(c)

 

 

 

 

(d)

 

 

 

Bank A/c                                                                Dr

             To Realisation A/c

(Being creditors paid 20,000 to the firm)

 

(b) No entry

 

Realisation A/c                                                    Dr

            To Bank A/c

(Being third creditor accepted 20,000 in cash and
investments of the book value of 65,000 in full settlement of
his claim)

 

C’s Capital A/c                                                  Dr

D’s Capital A/c                                                  Dr

            To Realisation A/c

(Being loss on dissolution transferred to partners capital accounts)

 

20,000

 

 

 

 

 

20,000

 

 

 

 

4,500

3,000

 

 

 

 

20,000

 

 

 

 

 

20,000

 

 

 

 

 

7,500

 

 

Note: No entry will be made when asset is taken over by the creditor

Concept: Dissolution of Partnership Firm
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