Question

Jain and Gupta were partners in a firm sharing profits and losses in the ratio of 7 : 3. On 31^st March, 2024, the firm was dissolved. After transferring various assets (other than cash 6,400) and the third-party liabilities to Realisation Account, the following transactions took place:

• [(i)] Debtors 80,000 were taken over by a debt collection agency at 10% discount.
• [(ii)] Creditors amounting to 40,000 were taken over by Jain.
• [(iii)] Realisation expenses amounted to 5,100, which were paid by Gupta.

Pass necessary journal entries for the above transactions in the books of Jain and Gupta.

Hint:

Assets taken over at discount reduce the amount credited to Realisation A/c. If partners take over liabilities or pay expenses, credit their capital accounts.

Answer 1

(i) Debtors Realised:
Debtors taken over at 10% discount \(\Rightarrow\) Realised value = \( 80,000 - 8,000 = 72,000 \)
Cash / Bank A/c Dr. & 72,000
Profit and Loss (or Realisation) A/c Dr. & 8,000
To Realisation A/c & 80,000
(ii) Jain took over Creditors:
Realisation A/c Dr. & 40,000
To Jain’s Capital A/c & 40,000
(iii) Realisation expenses paid by Gupta:
Realisation A/c Dr. & 5,100
To Gupta’s Capital A/c & 5,100