Question

There was a contingent Liability in respect of bills of 1,00,000 which was under discount. Out of them, a holder of one bill of 20,000 became insolvent. Show journal entry











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Answer 1

Explanation:

Question

What Journal entries would be passed for following unrecorded liabilities on the dissolution of a firm partners A and B:

(a) There was a contingent liability in respect of bills discounted but not matured of Rs. 18,500. An acceptor of one bill of Rs. 2,500 became insolvent and fifty paise in a rupee was recovered. The liability of the firm on accout of this bill discounted and dishonoured has not so far been recorded.

(b) There was a contingent liability in respect of claim for damages for Rs. 75,000, such liability was settled for Rs. 50,000, and paid by the partner A.

(c) Firm will have to pay Rs. 10,000 as compensation to an injured employee, which was a contingent liability not accepted by firm.

(d) Rs. 5,000 for damages claimed by a customer has been disputed by the firm. It was settled at 70% by a compromise between the custorner and the firm.

Answer 2

Answer:

(a) (i) Realisation A/C Dr. 2500

To Bank A/C 2500

(Being settlement of unrecorded liability)

(ii) Bank A/C Dr. 1250

To Realisation A/C 1250

(Being realisation of an unrecorded asset at 50 paisa per rupee)

(b) Realisation A/C Dr. 50000

To A's Capital A/C 50000

(Being liability discharged off by A)

(c) Realisation A/C Dr. 10000

To Bank A/C 10000

(Being settlement of an unrecorded liability)

(d) Realisation A/C Dr. 3500

To Bank A/C 3500

(Being settlement of damages claimed by customer at 70% of the total amount