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L and M Were Partners in a Firm Sharing Profits in the Ratio of 2:3. 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 - CBSE (Arts) Class 12 - Accountancy

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Question

L and M were partners in a firm sharing profits in the ratio of 2:3. 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.1,40,000 accepted building valued at Rs.1, 80,000 and paid to the firm Rs.40,000.

(b) A second creditor for Rs.30,000 accepted machinery valued at Rs.28,000 in full settlement of his claim.

(c) A third creditor amounting to Rs.70,000 accepted Rs.30,000 in cash and investments of the book value of Rs.45,000 in full settlement of his claim.

(d) Loss on dissolution was Rs.4,000.

Pass necessary journal entries for the above transactions in the books of the firm assuming that all payments were made by cheque.

Solution

Journal

Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
 

Bank A/c                                                                                                                                                         Dr

          To Realisation A/c

 (Being creditors paid 40,000 to the firm)

 

No entry

 

Realisation A/c                                                                                                                                                 Dr

           To Bank A/c

(Being third creditor accepted 30,000 in cash and investments of the book value of 45,000 in full settlement of his claim)

 

L’s Capital A/c                                                                                                                                                  Dr

M’s Capital A/c                                                                                                                                                 Dr

           To Realisation A/c

(Being loss on dissolution transferred to partners capital accounts)

 

40,000

 

 

 

 

 

30,000

 

 

 

1,600

2,400

 

 

 

40,000

 

 

 

 

 

30,000

 

 

 

 

4,000

 

 

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

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Solution L and M Were Partners in a Firm Sharing Profits in the Ratio of 2:3. 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 Concept: Dissolution of a Partnership Firm.
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