Advertisement Remove all ads

Gaurav, Saurabh, and Vaibhav Were Partners in a Firm Sharing Profits and Losses in the Ratio of 2: 2: 1. They Decided to Dissolve the Firm on 31st March, 2018. - Accountancy

Advertisement Remove all ads
Advertisement Remove all ads
Advertisement Remove all ads
Journal Entry

Gaurav, Saurabh, and Vaibhav were partners in firm sharing profits and losses in the ratio of 2: 2: 1. They decided to dissolve the firm on 31st March 2018. After transferring Sundry assets (other than cash in hand and cash at Bank) and third-party liabilities to realisation account, the assets were realized and liabilities were paid off as follows:

(i) A machinery with a book value of ₹ 6,00,000 was taken over by Gaurav at 50% and stock worth ₹ 5,000 was taken over by a creditor of ₹ 9,000 in full settlement of his claim.

(ii) Land and building (book value ₹ 3,00,000) were sold for ₹ 4,00,000 through a broker who charged 2% commission.

(iii) The remaining creditors were paid ₹ 76,000 in full settlement of their claim and the remaining assets were taken over by Vaibhav for ₹ 17,000.

(iv) Bank loan of ₹ 3,00,000 was paid along with interest of ₹ 21,000.

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

Advertisement Remove all ads


Books of … 

Date Particulars   L.F.





(i) Gaurav’s Capital A/c Dr.   3,00,000  
  To Realisation A/c     3,00,000
  (Being machinery taken over at 50% rate)      
  Note: There will be no journal entry for mutual exchange between the firm and creditors against stock      
(ii) Bank A/c Dr. 4,00,000  
  To Realisation A/c     4,00,000
  (Being Land & Building sold )      
  Realisation A/c Dr. 8,000  
  To Bank A/c     8,000
  (Being brokerage commission paid on sale of Land and Building @ 2% of sale consideration)      
(iii) Realisation A/c Dr. 76,000  
  To Bank A/c     76,000
  (Being remaining creditors were paid off in full settlement)      
  Vaibhav’s Capital A/c Dr. 17,000  
  To Realisation A/c     17,000
  (Being remaining assets were taken over by Vaibhav)      
(iv) Realisation A/c Dr. 3,21,000  
  To Bank A/c (3,00,000 + 21,000)     3,21,000
  (Being bank loan paid along with interest thereupon)      
Concept: Dissolution of Partnership Firm
  Is there an error in this question or solution?
Advertisement Remove all ads

View all notifications

      Forgot password?
View in app×