Question

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.

Answer 1

JOURNAL OF L AND M
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Dr. (Rs.)}& \text{Cr. (Rs.)}\\ & & & & \text{Rs}& \text{Rs}\\ \text{(a)}& \text{Bank A/c}& \text{Dr.}& & 40,000& \\ & \text{To Realisation A/c}& & & & \text{40,000}\\ & \text{(Pament received from the first creditor)}& & & & \\ \text{(b)}& \text{No Entry}& & & & \\ \text{(c)}& \text{Realisation A/c}& \text{Dr.}& & 30,000& \\ & \text{To Bank A/c}& & & & 30,000\\ & \text{(Payment made to the third creditor in full settlement)}& & & & \\ \text{(d)}& \text{L's Capital A/c}& \text{Dr.}& & 1,600& \\ & \text{M's Capital A/c}& \text{Dr.}& & 2,400& \\ & \text{To Realisation A/c}& & & & 4,000\\ & \text{(Loss on realisation transferred to Partner's capital}& & & & \\ & \text{accounts)}& & & & \end{array}$