Question

What Journal entries would be passed for discharge of following unrecorded liabilities on the dissolution of a firm of partners A and B:
(a) There was a contingent liability in respect of bills discounted but not matured of ₹ 18,500. An acceptor of one bill of ₹ 2,500 became insolvent and fifty paise in a rupee was recovered. The liability of the firm on account of this bill discounted and dishonoured has not so far been recorded.
(b) There was a contingent liability in respect of a claim for damages for ₹ 75,000, such liability was settled for ₹ 50,000 and paid by the partner A.
(c) Firm will have to pay ₹ 10,000 as compensation to an injured employee, which was a contingent liability not accepted by the firm.
(d) ₹ 5,000 for damages claimed by a customer has been disputed by the firm. It was settled at 70% by a compromise between the customer and the firm.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
a.	Bank A/c	Dr.		1,250
	To Realisation A/c				1,250
	(Amount received)
	Realisation A/c
	To Bank A/c	Dr.		2,500
	(Liability discharged)				2,500
b.	Realisation A/c	Dr.		50,000
	To A’s Capital A/c				50,000
	(Liability paid by a partner)
		Dr.		10,000
c.	Realisation A/c				10,000
	To Bank A/c
	(Liability discharged)
d.	Realisation A/c	Dr.		3,500
	To Bank A/c				3,500
	(Liability discharged)