Give the journal entry(ies) to be recorded for the following, in case of the dissolution of a partnership firm: For closure of assets accounts.
For the closure of asset accounts during the dissolution of a firm, all assets (excluding cash, bank, and fictitious assets) are transferred to the Realisation Account at their book values. This process closes the asset accounts in the books of the firm.
The necessary journal entry to record this is:
Realisation A/c Dr. To Assets (Individually) A/c (Being assets transferred to Realisation Account)
It is noted that sundry debtors are transferred at their gross value, while the provision for doubtful debts is transferred separately to the credit side of the Realisation Account.
Explanation
According to the provided text under section 4.4.1 'Journal Entries', specifically point 1 regarding the transfer of assets, all asset accounts excluding cash, bank, and fictitious assets are closed by transferring them to the debit of the Realisation Account at their book values. The textbook explicitly provides the journal entry format: Realisation A/c Dr. To Assets (Individually) A/c. It further clarifies that sundry debtors are transferred at gross value.
Solution Steps
Step 1: Identify all assets excluding cash, bank, and fictitious assets.
Step 2: Determine the book value of these assets.
Step 3: Pass the journal entry by debiting Realisation Account and crediting the individual Asset accounts to close them.