Page 180 - DEBKVOL-1

Chapter 8 Dissolution of a Partnership Firm 8.5
.
Illustration 2 (Dissolution—Journal Entries).
What Journal entries will be passed in the books of A and B sharing profits and losses in the
ratio of 3 : 1, for the following transactions on dissolution of the firm?
(i) An unrecorded asset realised ` 25,000.
(ii) Stock of ` 20,000 was taken by partner A.
(iii) Creditors were paid ` 30,000.
(iv) B to bear realisation expenses for which he will get ` 1,900. The actual expenses paid by
B were ` 1,500.
(v) There was a balance of ` 10,000 in the General Reserve Account on the date of
dissolution.
(vi) Gain (Profit) on Realisation of ` 40,000 is to be distributed between partners A and B in
the ratio of 3 : 1.
Solution: JOURNAL

Date Particulars L.F. Dr. (`) Cr. (`)
(i) Bank A/c ...Dr. 25,000
To Realisation A/c 25,000
(Realisation of an unrecorded asset)
(ii) A’s Capital A/c ...Dr. 20,000
To Realisation A/c 20,000
(Stock taken by A)
(iii) Realisation A/c ...Dr. 30,000
To Bank A/c 30,000
(Payment made to creditors)
(iv) Realisation A/c ...Dr. 1,900
To B’s Capital A/c (Note) 1,900
(Expenses payable to B)
(v) General Reserve A/c ...Dr. 10,000
To A’s Capital A/c 7,500
To B’s Capital A/c 2,500
(Transfer of General Reserve)
(vi) Realisation A/c ...Dr. 40,000
To A’s Capital A/c 30,000
To B’s Capital A/c 10,000
(Transfer of realisation gain (profit))
Note: When it is agreed that partner will bear the realisation expenses and for this he is paid an agreed amount,
then amount payable to the partner is debited for expenses.
Illustration 3.
Pass necessary Journal entries for the following transactions on dissolution of the firm of Sudha
and Shiva after various assets (other than cash) and outside liabilities have been transferred
to Realisation Account:
(i) Sudha agreed to pay off her husband’s loan ` 19,000.
(ii) A Debtor whose debt of ` 9,300 was written off as bad in the books paid ` 7,500 in full
settlement.