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Question

X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 2 : 1 respectively. The firm was dissolved on 1st March, 2013. After transferring assets (other than cash) and third party liabilities to the 'Realisation Account' you are provided with the following information:
(a) There was a balance of ₹ 18,000 in the firm's Profit and Loss Account.
(b) There was an unrecorded bike of ₹ 50,000 which was taken over by X.
(c) Creditors of ₹ 5,000 were paid ₹ 4,000 in full settlement of accounts.
Pass necessary Journal entries for the above at the time of dissolution of firm.

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Solution

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

1.

Profit and Loss A/c*

Dr.

18,000

To X’s Capital A/c

9,000

To Y’s Capital A/c

6,000

To Z’s Capital A/c

3,000

(Balance in P&L A/c divided among Partners in the ratio of 3:2:1)

2.

X’s Capital A/c

Dr.

50,000

To Realisation A/c

50,000

(An unrecorded asset taken over by X)

3.

Realisation A/c

Dr.

4,000

To Bank A/c

4,000

(Creditors were paid Rs 4,000 in full settlement

of their claim of Rs 5,000)


*Balance in Profit and Loss A/c always mean positive balance i.e. credit balance.

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