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Question
Pass the necessary journal entries for the following transactions on the dissolution of the partnership firm of Tanay and Mehak after various assets (other than cash) and external liabilities have been transferred to Realisation Account:
- Creditors of ₹ 60,000 accepted stock valued at ₹ 59,000 in full settlement of their claim.
- Tanay agreed to pay off his wife's loan of ₹ 12,000.
- The firm had a debit balance of ₹ 18,000 in the profit and loss account on the date of dissolution.
- An unrecorded liability of ₹ 20,000 was paid by partner, Mehak, at a discount of 10%.
- Tanay's loan of ₹ 4,000 was paid through a cheque.
- Expenses on dissolution amounted to ₹ 11,000 which were paid by Mehak.
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Solution
| Journal Entries | ||||
| Date | Particulars | L.F | Debit (₹) | Credit (₹) |
| (i) | No Entry | |||
| (ii) | Realisation A/c ...Dr. | 12,000 | ||
| To Tanay's Capital A/c | 12,000 | |||
| (Being agreed to pay his wife loan) | ||||
| (iii) | Tanay's Capital A/c ...Dr. | 9,000 | ||
| Mehak's Capital A/c ...Dr. | 9,000 | |||
| To Profit and Loss A/c | 18,000 | |||
| (Being Dr. balance of profit and loss distributed) | ||||
| (iv) | Realisation A/c ...Dr. | 18,000 | ||
| To Mehak's Capital A/c | 18,000 | |||
| (Being liabilities paid by Mehak) | ||||
| (v) | Tanay's Loan A/c ...Dr. | 4,000 | ||
| To Bank A/c | 4,000 | |||
| (Being Tanay's loan paid) | ||||
| (vi) | Realisation A/c ...Dr. | 11,000 | ||
| To Mehak's Capital A/c | 11,000 | |||
| (Being dissolution expense paid by Mehak) | ||||
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| ₹ 20,000 | ? | ₹ 4,000 | |
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| ₹16,000 | ₹12,000 | ? | |
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| ₹ 21,000 | ₹16,000 | ? | |
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| ₹ 51,000 | ? | ₹ 17,000 | |
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| ? | ₹ 7,000 | ₹ 21,000 |
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| Creditors | 18,400 | Building | 88,000 |
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| Ganesh | 40,000 | Bills Receivable | 4,000 |
| Kartik | 80,000 | Cash | 4,000 |
| 1,64,000 | 1,64,000 | ||
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| Capital Accounts : | Building | 10,500 | |
| Amul | 15,000 | Plant | 13,500 |
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The average number of months for which interest on drawings will be calculated, will be:
Ira (a partner in a firm) was allowed to retain the whole of the stock as her remuneration for services rendered by her in the course of dissolution of the firm. The value of stock was ₹ 10,000 which had been transferred to the Realisation Account.
Complying with the accounting principle of full disclosure, record the above transaction in the books of the partnership firm at the time of its dissolution.
