Question

Ritesh and Farhan are partners in a firm sharing profits and losses in the ratio of 3 : 1. They decided to dissolve their firm on 31^st March, 2021.

You are required to pass the necessary journal entries for the following, after the realisable assets and outside liabilities have been transferred to the Realisation Account.

1. Creditors of ₹ 20,000 were paid the amount due to them, by giving them an unrecorded asset worth ₹ 4,000 and the balance in cash.
2. Bills Payable of ₹ 30,000 were due to be paid on 30^th April, 2021. They were paid on the date of dissolution of the firm at a rebate of 5% per annum.
3. Realisation expenses of ₹ 2,000 were to be borne by Farhan. These were paid by the firm on his behalf.

Answer 1

Journal Entries
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
(a)	Realisation A/c   ...Dr.		16,000	-
	To Cash/Bank A/c		-	16,000
	(Being cash paid to creditors)
(b)	Realisation A/c   ...Dr.		29,875	-
	To Cash/Bank A/c		-	29,875
	(Being cash paid for Bills Payable)
	(₹ 30,000 `xx 5/12 xx 1/12` = ₹ 125)
	(₹ 30,000 − ₹ 125 = ₹ 29,875)
(c)	Farhan’s Capital A/c   ...Dr.		2,000	-
	To Bank A/c		-	2,000
	(Being the realisation expenses paid by firm on behalf of Farhan)