Question

What journal entries would be recorded for the following transactions on the dissolution of a firm after various assets (Other than cash) on the third party liabilities have been transferred to realisation account ?

1. Arti took over the Stock worth Rs. 80,000 at Rs. 68,000.

2. There was unrecorded Bike of Rs. 40,000, which was taken over by Mr. Karim.

3. The firm paid Rs. 40,000 as compensation to employees.

4. Sundry creditors amounting to Rs. 36,000 were settled at a discount of 15$\%$.

5. Loss on realisation Rs. 42,000 was to be distributed between Arti and Karim in the ratio of 3 : 4.

Answer 1

Journal Entries

$\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{L.F.}& \text{Amt. (Dr.)}& \text{Amt. (Cr.)}\\ 1.& \text{Arti's Capital A/c}\text{Dr.}& & 68,000& \\ & \text{To Realisation A/c}& & & 68,000\\ & \underset{–}{\left(\text{Asset worth Rs. 80,000 taken over by Arti at Rs. 68,000}\right)}& & & \\ 2.& \text{Karim's Capital A/c}\text{Dr.}& & 40,000& \\ & \text{To Realisation A/c}& & & 40,000\\ & \underset{–}{\left(\text{Unrecorded bike worth Rs. 40,000 taken over by Karim}\right)}& & & \\ 3.& \text{Realisation A/c}\text{Dr.}& & 40,000& \\ & \text{To Bank A/c}& & & 40,000\\ & \underset{–}{\text{(Compensation paid to employees)}}& & & \\ 4.& \text{Realisation A/c}\text{Dr.}& & 30,600& \\ & \text{To Bank A/c}& & & 40,000\\ & \underset{–}{\left(\text{Creditors of Rs. 36,000 settled at discount of 15\%}\right)}& & & \\ 5.& \text{Arti's Capital A/c}\text{Dr.}& & 18,000& \\ & \text{Karim’s Capital A/c}& & 24,000& \\ & \text{To Realisation A/c}& & & 42,000\\ & (\text{Loss on realisation transferred to partner's}& & & \\ & \text{capital account in 3 : 4 ratio})& & & \end{array}$