There was an old computer which was written-off in the books of accounts in the pervious year. The same has been taken over by a partner Nitin for Rs.3,000. Journalise the transaction when the firm has been dissolved.
Journal Entry in the Books of the Firm:
| Date | Particulars | L.F. | Dr. (Rs.) | Cr. (Rs.) |
|---|---|---|---|---|
| Nitin's Capital A/c Dr. | 3,000 | |||
| To Realisation A/c | 3,000 | |||
| (Being unrecorded computer taken over by partner Nitin at agreed value) |
Explanation:
The old computer was written-off in the previous year, meaning it had no book value and did not appear in the Balance Sheet. During dissolution, when this unrecorded asset is taken over by a partner, it is treated as a realisation of an asset.
Since Nitin is taking over the computer for Rs. 3,000, his Capital Account is debited (as he owes this amount to the firm), and the Realisation Account is credited (representing the amount realised from the unrecorded asset).
Explanation
This question tests the student's understanding of treatment of unrecorded assets during dissolution. When an asset has been completely written-off in previous years, it becomes an unrecorded asset. When such an asset is taken over by a partner during dissolution, the partner's Capital Account is debited (as they are personally acquiring the asset and their claim in the firm reduces), and Realisation Account is credited (as it represents realisation proceeds). The context shows similar treatment in Question 8 where unrecorded assets like furniture, typewriter, and shares were dealt with during dissolution.
Solution Steps
Step 1: Identify that the computer is an unrecorded asset (already written-off in previous year)
Step 2: Determine that Nitin is taking over the asset for Rs. 3,000
Step 3: Debit Nitin's Capital Account (partner taking the asset owes the amount to the firm)
Step 4: Credit Realisation Account (amount realised from unrecorded asset during dissolution)