Question

7. Chander and Naresh were partners in a firm sharing profits in 3 :2 ratio. On

28.2.2020 their firm was dissolved. After the transfer of various assets (other

than cash) and third party liabilities to Realisation Account, the following

transactions took place:

1. A machine that was not recorded in the books was taken over by

Chander at Rs.3,000 whereas its expected value was Rs.5,000.

2. Total creditors of the firm were Rs.40,000. Creditors worth Rs.10,000

were given a piece of furniture costing Rs.8,000 in full and final

settlement. Remaining creditors allowed a discount of 10%.

3. Expenses of realisation Rs. 1,200 were paid by Naresh.

4. Loss on dissolution was Rs.3,400.

Pass necessary journal entries for the above transactions in the books of

the firm.​

Answer 1

Answer:

Explanation:

For the first transaction, since Chander took over the machine at a value lower than its expected value, it will result in a loss for the firm. This loss can be recorded as a debit to the realisation account and a credit to Chander's account for the amount of the difference.

For the second transaction, the payment of creditors can be recorded as a debit to the creditors' account and a credit to the bank account for the amount paid. The discount allowed to the creditors can be recorded as a loss for the firm, with a debit to the realisation account and a credit to the creditors' account for the discounted amount.

For the third transaction, the expenses of realisation can be recorded as a debit to the realisation expenses account and a credit to Naresh's account.

For the fourth transaction, the loss on dissolution can be recorded as a debit to the realisation account and a credit to the loss on dissolution account.