A a creditor ( already transferred to realisation a/c ) for 25,000 accepted furniture ( already transferred to realisation a/c ) at 36,000 in full settlement of his claim
D a creditor of 20,000 ( unrecorded in the books) agreed to accept computer ( unrecorded in the books) at 15,000 plus 2,000 in full settlement of his claim. pass journal entries and also explain it

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Solution

Case 1: No entry will be passed

Reason: Cash is neither coming in (for sale of asset) nor going out (for paying-off the liability). Moreover, an asset is given to a liability thus both of them gets cancelled from both the sides.

Case 2: Realisation A/c Dr. 2,000
To Cash A/c 2,000

Reason: Being an unrecorded computer is accepted by an unrecorded creditor at Rs 15,000 and balance of Rs 2,000 paid in cash. Thus, Rs 2,000 will be a loss for the business, thus debited to the Realisation A/c

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Similar questions

P and Q were partners in a firm. Pass journal entries for the following transactions on dissolution of the firm after various assets and external liabilities have been transferred to Realisation A/c :

(i) X, an unrecorded creditor of Rs. 10,000 was paid by partner P at a discount of 20%.

(ii) Y, an unrecorded creditor of Rs. 25,000, took over Computer at Rs. 30,000. Balance was paid by him in cash.

(iii) Computer of Rs. 25,000 and a Vehicle of Rs. 10,000 were appearing in the Balance Sheet but no other additional information was given regarding these items.

(iv) A creditor to whom Rs. 10,000 were to be paid accepted an unrecorded asset of Rs. 15,000 in full settlement of his claim.

(v) An unrecorded asset of Rs. 35,000 was given to an unrecorded creditor of Rs. 50,000 in settlement of his claim of Rs. 30,000 and the balance was paid to him in cash.

(vi) P's loan was appearing on the liabilities side of the Balance Sheet at Rs. 50,000. He accepted an unrecorded asset of Rs. 40,000 at Rs. 35,000 and the balance was paid to him in Cash.

L and M were partners in a firm sharing profit in the ratio of 2 :3. On 28-2-2016 the firm was dissolved. After transferring assets (other than cash) and outsiders' liabilities to realisation account you are given the following information :

(a) A creditor for Rs. 1,40,000 accepted building valued at Rs 1,80,000 and paid to the firm Rs. 40,000.

(b) A second creditor for Rs. 30,000 accepted machinery valued at Rs. 28,000 in full settlement of his claim.

(c) A third creditor amounting to Rs. 70,000 accepted Rs. 30,000 in cash and investments of the book value of Rs. 45,000 in full settlement of his claim.

(d) Loss on realisation was Rs 4,000.

Pass necessary Journal entries for the above transactions in the books of the firm assuming that all payments were made by cheque.

Q. Lal and Pal were partners in a firm sharing profits in the ratio of 3 : 7. On 1st April, 2015 their firm was dissolved. After transferring assets (other than cash) and outsider's liabilities to Realisation Account, you are given the following information:
(a) A creditor of ₹ 3,60,000 accepted machinery valued at ₹ 5,00,000 and paid to the firm ₹ 1,40,000.
(b) A second creditor for ₹ 50,000 accepted stock at ₹ 45,000 in full settlement of his claim.
(c) A third creditor amounting to ₹ 90,000 accepted ₹ 45,000 in cash and investments worth ₹ 43,000 in full settlement of his claim.
(d) Loss on dissolution was ₹ 15,000.
Pass necessary Journal entries for the above transactions in the books of firm assuming that all payments were made by cheque.

Q. Record necessary Journal entries in the following cases:
(a) Creditors worth ₹ 85,000 accepted ₹ 40,000 as cash and Investment worth ₹ 43,000, in full settlement of their claim.
(b) Creditors were ₹ 16,000. They accepted Machinery valued at ₹ 18,000 in settlement of their claim.
(c) Creditors were ₹ 90,000. They accepted Building valued at ₹ 1,20,000 and paid cash to the firm ₹ 30,000.

Q. Pass the Journal entries for the following transactions on the dissolution of the firm of P and Q after various assets (other than cash) and outside liabilities have been transferred to Realisation Account:
(a) Stock ₹ 2,00,000. 'P' took over 50% of stock at a discount of 10%. Remaining stock was sold at a profit of 25% on cost.
(b) Debtors ₹ 2,25,000. Provision for Doubtful Debts ₹ 25,000. ₹ 20,000 of the book debts proved bad.
(c) Land and Building (Book value ₹ 12,50,000) sold for ₹ 15,00,000 through a broker who charged 2% commission.
(d) Machinery (Book value ₹ 6,00,000) was handed over to a creditor at a discount of 10%.
(e) Investment (Book value ₹ 60,000) realised at 125%.
(f) Goodwill of ₹ 75,000 and prepaid fire insurance of ₹ 10,000.
(g) There was an old furniture in the firm which had been written off completely in the books. This was sold for ₹ 10,000.
(h) 'Z' an old customer whose account for ₹ 20,000 was written off as bad in the previous year, paid 60%.
(i) 'P' undertook to pay Mrs. P's loan of ₹ 50,000.
(j) Trade creditors ₹ 1,60,000. Half of the trade creditors accepted Plant and Machinery at an agreed valuation of ₹ 54,000 and cash in full settlement of their claims after allowing a discount of ₹ 16,000. Remaining trade creditors were paid 90% in final settlement.

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