Question

Pass the necessary journal entries for the following transactions on the dissolution of the partnership firm of Sharma and Verma after the various assets (other than cash and bank balance) and outside liabilities have been transferred to Realisation Account: 
(i) Sharma paid creditors ₹ 34,000 in full settlement of their claim of ₹ 40,000. 
(ii) Verma agreed to pay his wife’s loan of ₹ 8,000. 
(iii) There was an old typewriter which had been written off completely from the books. It was estimated to realise ₹ 3,000. It was taken over by Verma at the estimated price less 20%. 
(iv) Neelu, an old customer whose account for ₹ 1,500 was written off as bad debt in the previous year, paid 80% of the amount. 
(v) Dissolution expenses amounting to ₹ 8,000 were paid by Sharma. (vi) Loss on realisation ₹ 40,000 was to be distributed between Sharma and Verma in their profit-sharing ratio of 3:2. 
 

Hint:

In dissolution accounts, always adjust liabilities, assets taken over, and expenses based on the partnership agreement and profit-sharing ratio.

Answer 1

Journal Entries: \[ \begin{array}{|l|r|l|r|} \hline \textbf{Date} & \textbf{Particulars} & \textbf{Debit (₹)} & \textbf{Credit (₹)} \\ \hline -- & \text{Realisation A/c Dr.} & 40,000 & -- \\ & \text{To Bank A/c} & -- & 34,000 \\ & \text{(Payment to creditors in full settlement of their claim)} & & \\ \hline -- & \text{Verma’s Capital A/c Dr.} & 8,000 & -- \\ & \text{To Realisation A/c} & -- & 8,000 \\ & \text{(Verma agreed to pay his wife’s loan)} & & \\ \hline -- & \text{Verma’s Capital A/c Dr.} & 2,400 & -- \\ & \text{To Realisation A/c} & -- & 2,400 \\ & \text{(Typewriter taken over by Verma at ₹3,000 less 20\%)} & & \\ \hline -- & \text{Bank A/c Dr.} & 1,200 & -- \\ & \text{To Realisation A/c} & -- & 1,200 \\ & \text{(Recovery of bad debts from Neelu at 80\% of ₹1,500)} & & \\ \hline -- & \text{Realisation A/c Dr.} & 8,000 & -- \\ & \text{To Bank A/c} & -- & 8,000 \\ & \text{(Dissolution expenses paid by Sharma)} & & \\ \hline -- & \text{Sharma’s Capital A/c Dr.} & 24,000 & -- \\ & \text{Verma’s Capital A/c Dr.} & 16,000 & -- \\ & \text{To Realisation A/c} & -- & 40,000 \\ & \text{(Loss on realisation distributed in the ratio 3:2)} & & \\ \hline \end{array} \]